Product quality, advertising intensity and market size
Bing Han and
Hayley Chouinard ()
Economics Letters, 2014, vol. 124, issue 2, 215-218
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)
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Working Paper: Product Quality, Advertising Intensity and Market Size (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:124:y:2014:i:2:p:215-218
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