Advertising as Noisy Information about Product Quality
نویسندگان
چکیده
A firm has to make consumers aware of a new product introduction. It also has to convince them that the product is of high quality. In this paper, we consider the interplay between directly and indirectly informative advertising in a monopoly model with repeat purchase. When consumers observe the advertising expenditure, the firm may excessively advertise high quality. However, when consumers only learn from seeing the product advertised, a high-quality firm cannot perfectly distinguish itself from low quality and advertises less than absent quality uncertainty.
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