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Product quality, advertising intensity and market size

Bing Han and Hayley Chouinard ()

Economics Letters, 2014, vol. 124, issue 2, 215-218

Abstract: We develop a model of product differentiation in which firms strategically compete in product quality and advertising intensity. Products exhibit a combination of vertical and horizontal differentiation. A consumer’s utility has a stochastic relationship with quality, but they are more likely to prefer a higher quality good. Consumers face a trade-off between higher quality goods and price. Increased competition leads to less advertising, but may result in higher or lower quality products offered in the market.

Keywords: Advertising intensity; Market size; Product quality (search for similar items in EconPapers)
JEL-codes: L11 L15 L22 (search for similar items in EconPapers)
Date: 2014
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Working Paper: Product Quality, Advertising Intensity and Market Size (2013) Downloads
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DOI: 10.1016/j.econlet.2014.05.020

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