Spillovers in Attribute Advertising

Steven Schmeiser

Review of Marketing Science, 2016, vol. 14, issue 1, 69-87

Abstract: When firms advertise a vertically differentiated product attribute, they increase the weight consumers put on that attribute. This creates a spillover effect as one firm’s advertising can increase demand for other firms that also have the attribute. I develop a market share attraction model and find that as spillover increases, firms advertise less. Profit can be increasing or decreasing in spillover depending on the particular industry environment. Spillover lends a “public good” quality to advertising and firms free-ride in equilibrium. An advertising ban has an ambiguous effect on the profits of firms with the attribute, but always increases profits of firms without the attribute.

Keywords: advertising; spillover; vertical differentiation (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1515/roms-2014-0020

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