Monday, February 6, 2012
Posted by D. Daniel Sokol
Winand Emons (University of Bern) and Claude Fluet (University of Quebec) have written on Non-Comparative versus Comparative Advertising of Quality.
ABSTRACT: Two firms produce a good with a horizontal and a vertical characteristic called quality. The difference in the unobservable quality levels determines how the firms share the market. We consider two scenarios: in the first one, firms disclose quality; in the second one, they send costly signals thereof. Under non-comparative advertising a firm advertises its own quality, under comparative advertising a firm advertises the quality differential. In either scenario, under comparative advertising the firms never advertise together which they may do under non-comparative advertising. Moreover, under comparative advertising firms do not advertise when the informational value to consumers is small.