Download or read book Do Prices and Advertising Signal Quality written by Winston T. H. Koh and published by . This book was released on 1993 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Performance Based Advertising written by Juan Feng and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Performance-based advertising is becoming increasingly popular in the online advertising industry, where the advertiser pays to the publisher only when an "action" (e.g., a click-through) is generated by the advertisement. We study how the performance-based advertising scheme affects one of the fundamental functions of advertising - signaling product quality. We identify two critical factors that affect the signaling function of advertising under performance-based pricing: (1) the demand uncertainty factor, which measures advertisers' uncertainty about their potential market, and (2) the advertising performance over-measure factor, which describes the extent to which product performance accounts for advertising performance. We find that the uncertainty factor facilitates, but the over-measure factor impedes (or even destroys) the signaling function of performance-based advertising. Specifically, our results show that in the presence of the over-measure factor, switching from impression-based to performance-based advertising: (a) reduces the number of situations in which advertising can be used to signal quality, (b) increases the prices charged to consumers, (c) increases the expected advertising expenditure if the cost differentiation between the high- and low-quality firms is sufficiently high, but decreases the expected advertising expenditure otherwise, and (d) increases the advertiser's profit if the over-measure factor is low but the uncertainty factor is high, and decreases the profit otherwise.
Download or read book Perceived Quality written by Jacob Jacoby and published by Lexington Books. This book was released on 1985 with total page 344 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Signaling Quality with a Money Back Guarantee written by Sridhar Moorthy and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Direct marketing is witnessing explosive growth. As consumers increasingly purchase products from their homes, their ability to judge the quality of products they buy is significantly reduced. In this paper we study how money-back guarantees can signal product quality in such environments. We interpret product quality broadly to mean both the level of attributes promised as well as the firm s consistency in delivering on those promises. A key aspect of our formulation is the explicit consideration of transaction costs and alternative signals of product quality. Transaction costs are the costs the seller or buyer faces when redeeming a money-back guarantee. We show that money- back guarantees cannot work as a signal of quality without seller transaction costs. However, if these costs are very large, then there are less costly ways to signal, namely by charging a high price. We compare the signaling performance of (1) price, (2) price with uninformative advertising (+money-burning ), and (3) price with a money-back guarantee. Whereas uninformative advertising does not work at all in our model, under certain conditions a money-back guarantee is necessary to signal, and under other conditions, a money-back guarantee is a useful supplement to price.
Download or read book Price Competition and Advertising Signals written by Federal Trade Federal Trade Commission and published by CreateSpace. This book was released on 2015-06-01 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: Can price and advertising be used by vertically differentiated duopolists to signal qualities to consumers? We show that pure price separation is impossible if the vertical differentiation is small, while adding dissipative advertising ensures existence of separating equilibria. Two simple, but non-standard, equilibrium refinements are introduced to deal with the multi-sender nature of the game, and they are shown to produce a unique separating and a unique pooling profile. Pooling results in a zero-profit Bertrand outcome. Separation gives strictly positive duopoly profits, and dissipative advertising is used by the high-quality firm when products are sufficiently close substitutes. Finally, depending on the differentiation, the separating prices of both firms may be distorted upwards or downwards compared to the complete information benchmark.
Download or read book Advertising as a Signal of Product Quality written by Ignatius J. Horstmann and published by London, Ont. : Department of Economics, University of Western Ontario. This book was released on 1995 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Price Competition and Advertising Signals written by Federal Trade Federal Trade Commission and published by Createspace Independent Publishing Platform. This book was released on 2016-04-05 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: Can price and advertising be used by vertically differentiated duopolists to signal qualities to consumers? We show that pure price separation is impossible if the vertical differentiation is small, while adding dissipative advertising ensures existence of separating equilibria. Two simple, but non-standard, equilibrium refinements are introduced to deal with the multi-sender nature of the game, and they are shown to produce a unique separating and a unique pooling profile. Pooling results in a zero-profit Bertrand outcome. Separation gives strictly positive duopoly profits, and dissipative advertising is used by the high-quality firm when products are sufficiently close substitutes. Finally, depending on the differentiation, the separating prices of both firms may be distorted upwards or downwards compared to the complete information benchmark.
Download or read book Advertising as a Signal of Quality A New Explanation written by and published by . This book was released on 1995 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The present article provides a unified explanation for several phenomena related to advertising by firms. (i) Advertising without repeat purchase of the product, (ii) advertising from established brands, or post-introductory, (iii) simultaneous advertising from low and high quality firms, (iv) its persistence and pro-cyclicality. The explanation is original because it rests upon oligopolistic interaction. The analysis hinges upon two fundamental results. The rst is that advertising allows separation when a signal via prices only does not. The second is that purely dissipative advertising can be used to strategically deter entry. Hence, a link is established between entry deterrence and signaling.
Download or read book Signaling Unobservable Quality Choice Through Price and Advertising written by Fulan Wu and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a model in which a firm can use price and advertising jointly as a signal of their private choice of quality, whereby quality is endogenously chosen by firms. The monopoly model reveals that there exists a unique equilibrium in which the monopolist chooses high quality but a higher level of advertising compared to the full-information benchmark. The model is then extended to the case with competition of two imperfectly competitive firms. We find that if competition is not strong enough, then there exists a unique symmetric equilibrium in which both firms choose high quality. The equilibrium outcome shows that both firms will set lower prices and a higher level of advertising as compared to the monopoly case. Interestingly, we find that more competition might lead to a loss of social welfare due to the increasing level of advertising for quality signaling. The numerical results further demonstrate that as competition gets more intense from the monopoly, prices decrease initially, the level of advertising increases, and social welfare decreases, which may make a ban on advertising more recommendable after a certain threshold.
Download or read book Industrial Organization written by Paul Belleflamme and published by Cambridge University Press. This book was released on 2010-01-07 with total page 725 pages. Available in PDF, EPUB and Kindle. Book excerpt: Industrial Organization: Markets and Strategies provides an up-to-date account of modern industrial organization that blends theory with real-world applications. Written in a clear and accessible style, it acquaints the reader with the most important models for understanding strategies chosen by firms with market power and shows how such firms adapt to different market environments. It covers a wide range of topics including recent developments on product bundling, branding strategies, restrictions in vertical supply relationships, intellectual property protection, and two-sided markets, to name just a few. Models are presented in detail and the main results are summarized as lessons. Formal theory is complemented throughout by real-world cases that show students how it applies to actual organizational settings. The book is accompanied by a website containing a number of additional resources for lecturers and students, including exercises, answers to review questions, case material and slides.
Download or read book Performance Based Pricing written by Juan Feng and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Performance-based advertising is becoming increasingly popular in the online advertising industry, where advertisers pay the publisher only when an “action” (e.g., a click-through or a purchase) is generated by the advertisement. This paper illustrates that adopting this emerging advertising scheme has profound impacts on one of the fundamental functions of advertising - signaling product quality. We identify several important dimensions that affect the signaling function of performance-based advertising relative to its traditional counterpart (impression-based advertising). These include: (1) Information - total advertising expenditure is determined after the demand is realized, so it is unobservable to consumers when making purchase decisions; (2) Ad performance - the measured “performance” (e.g., recorded click-throughs) includes actions generated by first-time buyers (i.e., advertising performance) and actions generated by repeat buyers (i.e., product performance), which increases the cost of signaling through advertising; (3) Demand uncertainty - the merchant pays only when a response to the advertisement is generated, which reduces the merchant's advertising uncertainty. We build a model of performance-based advertising by explicitly incorporating these factors and derive the conditions under which switching to performance-based advertising will (a) disable or strengthen the signaling function of advertising, (b) help or hurt the merchant, and (c) lead to a shared interest (win-win or lose-lose) or a conflicting interest (win-lose) for the the publisher and the merchant.
Download or read book When Consumers Learn Money Burns written by Yogesh V. Joshi and published by . This book was released on 2020 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: This research analyzes a firm's investment in advertising that signals quality when consumers learn about quality not only from such advertising but also from interactions with other consumers in the form of observational learning or word of mouth. Further, word of mouth interactions may involve under-reporting (not everyone shares experiences), positivity (positive experiences are communicated more widely than negative ones) or negativity (negative experiences are communicated more widely than positive ones). The analysis focuses on whether a firm should advertise more or less aggressively in the presence of such consumer interactions as compared to their absence, and offers four key insights. First, consumer interactions can amplify the signaling effect of advertising, and as a consequence, to prevent mimicking it may be optimal for a high quality firm to become more aggressive and spend more on advertising to signal quality in the presence of such interactions, than without. Second, as under-reporting increases, it can be optimal to reduce advertising, sometimes significantly. Third, with increasing positivity, it can be optimal to increase advertising; and finally, even with increasing negativity, under certain conditions it may still be optimal to increase advertising rather than decreasing it.
Download or read book A Dynamic Model of Brand Choice When Price and Advertising Signal Product Quality written by Tulin Erdem and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we develop a structural model of household behavior in an environment where there is uncertainty about brand attributes, and both prices and advertising signal brand quality. Four quality signaling mechanisms are at work in the model: 1) price signals quality, 2) advertising frequency signals quality, 3) advertising content provides direct (but noisy) information about quality, and 4) use experience provides direct (but noisy) information about quality. We estimate our proposed model using scanner panel data on ketchup. If price is important as a signal of brand quality, then frequent price promotion may have the unintended consequence of reducing brand equity. We use our estimated model to measure the importance of such effects. Our results imply that price is an important quality signaling mechanism, and that frequent price cuts can have significant adverse effects on brand equity. The role of advertising frequency in signaling quality is also significant, but it is less quantitatively important than price.
Download or read book Animal Signals written by John Maynard Smith and published by Oxford University Press. This book was released on 2003-11-06 with total page 184 pages. Available in PDF, EPUB and Kindle. Book excerpt: The reliability of animal signals is a central problem for evolutionary biologists. This text argues that it is maintained in several ways, relevant in different circumstances, and that biologists must learn to distinguish between them.
Download or read book Advertising Or Price The Efficacy of Quality Informational Cues in Online Sponsored Search Markets written by Animesh Animesh and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The digitization of commerce has caused fundamental changes in consumer information search and use. With an increasing number of consumers using search engines as an integral component of their online purchase process, online sponsored search markets, such as those provided by Google and Yahoo!, have emerged as a dominant customer acquisition mechanism for sellers. Given the extent of information asymmetry in online markets, consumers rely on a number of informational cues or signals to infer the quality of sellers - advertising and price being the two most important among them. While the importance of advertising and price as signals of quality has been well established in traditional markets, online sponsored search markets have a number of unique characteristics that differentiate them from traditional settings and raise unanswered questions about the efficacy of different informational cues for consumers' search and transaction behaviors. Using a lab experiment, we examine how the knowledge of firms' relative advertising expenditures and prices affect consumers' search and purchase decisions. Contrary to earlier findings of the dominance of price signals in traditional markets, we find that firms' relative advertising expenditures serve as a stronger signal of quality in online sponsored search markets - a result attributable to the directional nature of these markets. We also find that the risk attitude of consumers has a significant impact on consumer beliefs and market outcomes. We discuss the implications of our findings for sellers and consumers using sponsored search markets, as well as for search intermediaries.
Download or read book Advertising and the Marketplace written by Pepall, Lynne and published by Edward Elgar Publishing. This book was released on 2021-07-31 with total page 294 pages. Available in PDF, EPUB and Kindle. Book excerpt: This accessible and comprehensive textbook explores the role of advertising in the marketplace. It investigates how firms’ advertising strategies are informative, persuasive or add value to the product advertised. The book explains in detail empirical methodologies used to identify the impact of advertising on consumer demand and on market structure and reviews some recent empirical findings. It concludes with an in-depth exploration of digital advertising and auctions along with a framework for current antitrust investigations into two-sided platforms (Google, Facebook) that are funded by advertising revenues.
Download or read book Price and Advertising Signals of Product Quality written by Paul Robert Milgrom and published by . This book was released on 1984 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:
