Competitive pricing and advertising with spillover

Xingyi Liu

Journal of Mathematical Economics, 2022, vol. 101, issue C

Abstract: We study firms’ advertising strategies when they face attention-limited consumers, who pay more attention to a horizontal attribute when it is more heavily advertised. Under competition, one firm’s advertising can affect a consumer’s valuation for competing products, which we term as the spillover effect. We show that competing firms may only advertise the horizontal attribute when the spillover is weak. Moreover, competing firms may advertise less than a monopolist.

Keywords: Limited attention; Spillover; Horizontal attribute; Advertising (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:101:y:2022:i:c:s0304406822000180

DOI: 10.1016/j.jmateco.2022.102660

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