Consumption externalities, coordination and advertising

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Title: Consumption externalities, coordination and advertising
Authors: Pastine, Ivan
Pastine, Tuvana
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Date: Jun-2001
Abstract: The aim of this Paper is to demonstrate that advertising can have an important function in markets with consumption externalities, apart from its persuasive and informative roles. We show that advertising may function as a device to coordinate consumer expectations of the purchasing decisions of other consumers in markets with consumption externalities. The implications of advertising as a coordinating device are examined in the pricing and advertising decisions of firms interacting strategically. While, at times, the one period advertising expense can exceed the one period monopoly profit, in equilibrium consumers will pay a premium for the more heavily advertised brand.
Type of material: Working Paper
Publisher: Centre for Economic Policy Research
Series/Report no.: CEPR Discussion Papers; 2687
Copyright (published version): Copyright: Ivan Pastine and Tuvana Pastine
Keywords: AdvertisingCoordinationConsumption externalities
Subject LCSH: Advertising
Consumption (Economics)--Mathematical models
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Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Research Collection

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