Manuscript received 10.11.09; final version received 10.11.09.
AN ANALYSIS OF ADVERTISING WARS
Article first published online: 16 DEC 2010
© 2010 The Authors. The Manchester School © 2010 Blackwell Publishing Ltd and The University of Manchester
The Manchester School
Special Issue: Product/Process Innovation and Market Structure
Volume 79, Issue 1, pages 100–124, January 2011
How to Cite
CHAKRABARTI, S. and HALLER, H. (2011), AN ANALYSIS OF ADVERTISING WARS. The Manchester School, 79: 100–124. doi: 10.1111/j.1467-9957.2010.02187.x
- Issue published online: 16 DEC 2010
- Article first published online: 16 DEC 2010
Comparative advertising by one brand against another showcases its merits versus the demerits of the other. In a two-stage game with finitely many firms, firms decide first how much to advertise against whom. In the second stage, given the advertising configuration, firms compete as Cournot oligopolists. In the symmetric case, equilibrium advertising constitutes a clear welfare loss. In the asymmetric case, depending on parameter values, a variety of outcomes are possible in equilibrium. An a priori disadvantaged firm (in terms of advertising costs or advertising effectiveness) may advertise more. Advertising can affect firms that are not advertisers or targets themselves.