Equilibrium Pricing under Concave Advertising Costs

Kultti Klaus () and Teemu Pekkarinen
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Kultti Klaus: Helsinki Graduate School of Economics, University of Helsinki, Helsinki, Finland

The B.E. Journal of Theoretical Economics, 2023, vol. 23, issue 1, 529-535

Abstract: We study Butters’s (1977. “Equilibrium Distributions of Sales and Advertising Prices.” The Review of Economic Studies 44 (3): 465–91) model under concave advertising costs, and determine a class of cost functions such that each seller sends the same finite number of ads in equilibrium. Then we consider the limit economy where the number of buyers and sellers grow indefinitely, and show that the equilibrium of the finite economy does not converge to an equilibrium in the limit economy.

Keywords: advertising; pricing; price distribution (search for similar items in EconPapers)
JEL-codes: D41 D47 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1515/bejte-2021-0169

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