Persuasive Advertising and Product Differentiation

Nils-Henrik von der Fehr and K. Stevik

Memorandum from Oslo University, Department of Economics

Abstract: In a Hotelling-type differentiated-products duopoly model we distinguish between three alternative ways that persuasive advertising may affect consumer perferences. We illustrate the implications of our theory - an contrast with results from models of informative advertising - by analysing the relationship between the degree of product differentiation and equilibrium levels of advertising. The analysis suggests that an positive relationship between equilibrium levels of advertising and (inherent) product substitutability is consistent only with advertising that 'increases perceived product differences'.

Keywords: DUOPOLIES; PRODUCTION; ADVERTISING (search for similar items in EconPapers)
JEL-codes: L11 L12 L22 L23 M37 (search for similar items in EconPapers)
Pages: 21 pages
Date: 1996
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Citations: View citations in EconPapers (9)

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Journal Article: Persuasive Advertising and Product Differentiation (1998)
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