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| Author: | Hertzendorf, M. N. Overgaard, P. B. |
| Title: | Price competition and advertising signals: signaling by competing senders |
| Journal: | Journal of Economics & Management Strategy
2001 : WINTER, VOL. 10:4, p. 621-662 |
| Index terms: | Prices Competition Advertising Duopoly |
| Language: | eng |
| Abstract: | The authors examine if price and advertising can be used by vertically differentiated duopolists to signal qualities to consumers? They show that pure price reparation is impossible if the vertical differentiation is small, while adding dissipative advertising ensures the existence of separating equilibria. Pooling results in a zero-profit Bertrand outcome. Compared to the complete-information benchmark, the separating prices of both firms are distorted upwards when the degree of vertical differentiation is large, and downwards when it is small. |
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