Does competition increase advertising?

Travis Ng and Tat-kei Lai
Additional contact information
Travis Ng: CUHK - The Chinese University of Hong Kong [Hong Kong]

Post-Print from HAL

Abstract: In the Milgrom-Roberts's advertising model, introducing the possibility to die before customers' repurchase alters the firm's advertising incentive to signal hidden product quality. Two opposing forces result, one mechanical and the other strategic. Depending on their relative strengths, the equilibrium advertising can either rise or fall. To the extent that competition threatens firms' survival, our result explains the mixed findings on the causal effects of competition on advertising. Introducing firm deaths in their model offers a new test of whether advertising signals quality, still an unsettled empirical question since Nelson first articulates advertising as a signal in 1974.

Date: 2023-04-17
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Published in Managerial and Decision Economics, 2023, 44 (6), pp.3233-3248. ⟨10.1002/mde.3874⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Does Competition Increase Advertising? (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04127958

DOI: 10.1002/mde.3874

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().