Advertising as a Signal of Quality, A New Explanation

Garella, Paolo ; Fluet, Claude Denys (1995) Advertising as a Signal of Quality, A New Explanation. Bologna: Dipartimento di Scienze economiche DSE, p. 27. DOI 10.6092/unibo/amsacta/5082. In: Quaderni - Working Paper DSE (231). ISSN 2282-6483.
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Abstract

The present article provides a unied explanation for several phenomena related to advertising by rms. (i) Advertising without repeat purchase of the product, (ii) advertising from established brands, or post-introductory, (iii) simultaneous advertising from low and high quality rms, (iv) its persistence and pro-cyclicality. The explanation is original because it rests upon oligopolistic interaction. The analysis hinges upon two fundamental results. The rst is that advertising allows separation when a signal via prices only does not. The second is that purely dissipative advertising can be used to strategically deter entry. Hence, a link is established between entry deterrence and signaling.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Garella, Paolo
Fluet, Claude Denys
Keywords
Advertising, signaling, entry deterrence, imperfect information,oligopoly, vertical di�erentiation
Subjects
ISSN
2282-6483
DOI
Deposit date
05 May 2016 10:42
Last modified
05 May 2016 10:42
URI

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