Issues in Advertising: The Economics of Persuasion

By David G. Tuerck | Go to book overview

question Nelson's conjecture that more heavily advertised brands are likely to be better buys. It is a curious feature of attribute advertising that it informs some buyers not to shop among certain brands. Thus the incentives for advertising are clearly related to expected size of the market. On the one hand those varieties that would be less viable when information is less imperfect obviously have less incentives to advertise. In this sense the incentive to advertise depends on the seller's expectations of how well his brands cater to market preferences. Hence more heavily advertised brands are likely to be better buys. On the other hand, customers with minority preferences suffer in the presence of imperfect information because it is more costly for sellers to seek them out and tailor products to their needs and preferences. Specialized minority varieties may still appear in the market without much advertising if minority preferences are sufficiently intense relative to high volume alternative goods and their private costs of search are not too large. Clearly more heavily advertised brands are more likely to cater to "mass preferences" in the market and are unlikely best buys for those with more esoteric tastes.


Appendix

This is an analysis of the optimum search strategies of consumers in markets of the type described above, pp. 165-179, in the presence of imperfect information and costs of transacting. George Stigler and J. J. McCall examined search behavior in markets for identical and homogeneous goods that sustain price dispersion by transaction costs.27 Here I attempt to generalize their results to markets where price dispersion is also sustained by transactions costs but where goods are heterogeneous. Again the heterogeneity is indexed by the attributes embodied by goods.

The model with full information in the second section of this paper showed that knowledge of the price-attributes function p(z) contained all relevant data the consumer needed to make a correct decision. In the case of incomplete information, the immediate generalization of p(z) is a joint probability distribution of product prices and characteristics. Denote the joint density defined over (p,z) by ϕ(p,z) dpdz. The conditional distribution of price given z represents observed price dispersion among varieties in the market with identical attributes z. If all goods are homogeneous and equivalent in characteristics, the conditional density completely describes market observations, just as in Stigler and McCall. Thus one can view the present problem as a "distribution of

____________________
27
See Stigler, "The Economics of Information," pp. 213-225, and J. J. McCall, "Economics of Information and Job Search," Quarterly Journal of Economics, vol. 84 ( February 1970), pp. 113-126.

-184-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this book

This book has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this book

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited page

Bookmark this page
Issues in Advertising: The Economics of Persuasion
Table of contents

Table of contents

  • Title Page iii
  • Major Contributors v
  • Contents ix
  • Introduction 1
  • Acknowledgments 11
  • Part One Issues in Regulation 13
  • Advertising and Legal Theory 15
  • Advertising Regulation and the Consumer Movement 27
  • Commentaries 45
  • Part Two Advertising and the Firm 69
  • Towards a Theory of the Economics of Advertising 71
  • Introduction 71
  • Optimal Advertising: An Intra-Industry Approach 91
  • Conclusion 111
  • Technical Appendix 112
  • Commentaries 115
  • Part Three Advertising as Information 131
  • Advertising as Information Once More 133
  • Appendix A: Derivation of the Relationship Between a and P 156
  • Appendix B: Data Sources 158
  • Advertising, Information, and Product Differentiation 184
  • Commentaries 193
  • Four Part Advertising, Concentration, and Profits 215
  • Advertising Intensity and Industrial Concentration- an Empirical Inquiry, 1947-1967 217
  • Conclusions 249
  • Advertising and Oligopoly: Correlations in Search of Understanding 253
  • Appendix A 262
  • Appendix B 263
  • Commentaries 267
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
/ 286

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.