Negative Advertising and Competitive Positioning

Gorkem Bostanci, Pinar Yildirim () and Kinshuk Jerath ()
Additional contact information
Pinar Yildirim: Marketing Department, Wharton School of the University of Pennsylvania, Philadelphia, Pennsylvania 19104
Kinshuk Jerath: Marketing Division, Columbia Business School, Columbia University, New York, New York 10027

Management Science, 2023, vol. 69, issue 4, 2361-2382

Abstract: Negative advertising provides information about the weaknesses of a competitor’s product. We study negative advertising with a focus on how its regulation impacts product positioning for profit-maximizing firms. We build a model of informative advertising competition, where product positioning is endogenous, and consumers have rational expectations. We show that despite the informational benefits of negative advertising, permitting it (as the Federal Trade Commission in the United States does) may lead to reduced product differentiation and lower consumer welfare, even in markets where firms do not use negative advertising in equilibrium. We then extend our model to political competition, where a candidate’s objective is to obtain a larger share of votes than the competitor. We show that political competition supports higher positional differentiation, along with more negative advertising than product competition, in line with observed high use of negative advertising in political races and their rarer use in product competition.

Keywords: negative advertising; product positioning; regulation; political campaigns (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:69:y:2023:i:4:p:2361-2382

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