We sold a million units: the role of advertising past-sales

Jose Moraga-Gonzalez and Paulo Monteiro

No 357, FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil)

Abstract: In a market where past-sales embed information about consumers’ tastes (quality), we analyze the seller’s incentives to invest in a costly advertising campaign to report them under two informational assumptions. In the …rst scenario, a pooling equilibrium with past-sales advertising is derived. Information revelation only occurs when the seller bene…ciates from the herding behaviour that the advertising campaign induces on the part of consumers. In the second informational regime, a separating equilibrium with past-sales advertising is computed. Information revelation always happens, either through prices or through costly advertisements.

Date: 1999-07-01
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Citations: View citations in EconPapers (1)

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Journal Article: We Sold a Million Units -- The Role of Advertising Past-Sales (2003)
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