Ilwoo Hwang (University of Miami)
April 29 @ 12:45 - 13:45
“Competitive Advertising and Pricing”
Abstract: We consider an oligopoly model in which each firm chooses not only its price but also its advertising strategy regarding how much product information to provide. Unlike most previous studies, we impose no structural restriction on feasible advertising content, that is, each firm is endowed with full flexibility in its advertising choice. We provide a general and comprehensive characterization for the unique symmetric pure-price equilibrium and investigate under what conditions the equilibrium exists. Our analysis illuminates how competition shapes firms’ advertising incentives and how a firm’s advertising decision interacts with its pricing decision.