Advertising: the Persuasion Game

The "Persuasion Game" was originally configured to analyze a firm’s choice of how much vertical product information it would wish to reveal. The equilibrium "unravels" so that a firm wants to reveal its true quality. We extend the persuasion game to bring it squarely into the economics of advertising by first formulating it in the context of first exciting consumer interest into learning more about the product, and then adding price and horizontal product information, in order to analyze advertising content disclosed to consumers. We show that quality information takes precedence over price information and horizontal product information. Some broadly supporting evidence is provided from airline ads in newspapers.