[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_3470.html
   My bibliography  Save this paper

Persuading Consumers with Social Attitudes

Author

Listed:
  • Stefan Buehler
  • Daniel Halbheer
Abstract
This paper analyzes persuasive advertising and pricing in oligopoly if firms sell differentiated products and consumers have heterogeneous social attitudes towards the consumption by others. Deriving product demand from primitives, we show that the demand-enhancing effect of persuasive advertising varies across consumers and increases in the average degree of conformity. In equilibrium, both quality and cost leaders choose higher advertising intensities and charge higher prices than their competitors. In addition, we show that an increase in the average degree of conformity among consumers reinforces asymmetries between firms.

Suggested Citation

  • Stefan Buehler & Daniel Halbheer, 2011. "Persuading Consumers with Social Attitudes," CESifo Working Paper Series 3470, CESifo.
    • Handle: RePEc:ces:ceswps:_3470
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp3470.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bloch, Francis & Manceau, Delphine, 1999. "Persuasive advertising in Hotelling's model of product differentiation," International Journal of Industrial Organization, Elsevier, vol. 17(4), pages 557-574, May.
    2. Nils-Henrik M. von der Fehr & Kristin Stevik, 1998. "Persuasive Advertising and Product Differentiation," Southern Economic Journal, John Wiley & Sons, vol. 65(1), pages 113-126, July.
    3. repec:bla:jindec:v:49:y:2001:i:2:p:113-35 is not listed on IDEAS
    4. Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: I. Overview and Nondiscriminatory Pricing," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 1-37, Spring.
    5. Farrell, Joseph & Klemperer, Paul, 2007. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 31, pages 1967-2072, Elsevier.
    6. Baake, Pio & Boom, Anette, 2001. "Vertical product differentiation, network externalities, and compatibility decisions," International Journal of Industrial Organization, Elsevier, vol. 19(1-2), pages 267-284, January.
    7. Simon P. Anderson & Stephen Coate, 2005. "Market Provision of Broadcasting: A Welfare Analysis," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(4), pages 947-972.
    8. Stefan Buehler & Daniel Halbheer, 2011. "Selling when Brand Image Matters," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(1), pages 102-118, March.
    9. Grilo, Isabel & Shy, Oz & Thisse, Jacques-Francois, 2001. "Price competition when consumer behavior is characterized by conformity or vanity," Journal of Public Economics, Elsevier, vol. 80(3), pages 385-408, June.
    10. Karni, Edi & Schmeidler, David, 1990. "Fixed Preferences and Changing Tastes," American Economic Review, American Economic Association, vol. 80(2), pages 262-267, May.
    11. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    12. Athey, Susan & Schmutzler, Armin, 2001. "Investment and Market Dominance," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 1-26, Spring.
    13. Blundell,Richard & Newey,Whitney K. & Persson,Torsten (ed.), 2006. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9780521871525, September.
    14. Mark Armstrong & Robert Porter (ed.), 2007. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 3, number 1.
    15. Blundell,Richard & Newey,Whitney K. & Persson,Torsten (ed.), 2006. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9780521692083, September.
    16. Nils‐Henrik M. von der Fehr & Kristin Stevik, 1998. "Persuasive Advertising and Product Differentiation," Southern Economic Journal, John Wiley & Sons, vol. 65(1), pages 113-126, July.
    17. Julio J. Rotemberg, 2010. "Persuasion and empathy in salesperson-customer interactions," NBER Working Papers 15975, National Bureau of Economic Research, Inc.
    18. Simon P. Anderson & André de Palma, 2001. "Product Diversity in Asymmetric Oligopoly: Is the Quality of Consumer Goods too Low?," Journal of Industrial Economics, Wiley Blackwell, vol. 49(2), pages 113-135, June.
    19. Peitz, Martin & Valletti, Tommaso M., 2008. "Content and advertising in the media: Pay-tv versus free-to-air," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 949-965, July.
    20. Clark, Andrew E. & Oswald, Andrew J., 1998. "Comparison-concave utility and following behaviour in social and economic settings," Journal of Public Economics, Elsevier, vol. 70(1), pages 133-155, October.
    21. Gabszewicz, Jean J. & Laussel, Didier & Sonnac, Nathalie, 2005. "Does advertising lower the price of newspapers to consumers? A theoretical appraisal," Economics Letters, Elsevier, vol. 87(1), pages 127-134, April.
    22. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 841-877, October.
    23. Justin P. Johnson & David P. Myatt, 2006. "On the Simple Economics of Advertising, Marketing, and Product Design," American Economic Review, American Economic Association, vol. 96(3), pages 756-784, June.
    24. Mark Armstrong Author-Email: mark.armstrong@ucl.ac.uk Author-Workplace-Name: University College of London, 2006. "Competition in Two-Sided Markets," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 668-691, Autumn.
    25. Nitin Mehta & Xinlei (Jack) Chen & Om Narasimhan, 2008. "Informing, Transforming, and Persuading: Disentangling the Multiple Effects of Advertising on Brand Choice Decisions," Marketing Science, INFORMS, vol. 27(3), pages 334-355, 05-06.
    26. Kaiser, Ulrich & Song, Minjae, 2009. "Do media consumers really dislike advertising? An empirical assessment of the role of advertising in print media markets," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 292-301, March.
    27. Mark B. Vandenbosch & Charles B. Weinberg, 1995. "Product and Price Competition in a Two-Dimensional Vertical Differentiation Model," Marketing Science, INFORMS, vol. 14(2), pages 224-249.
    28. Kevin Lane Keller & Donald R. Lehmann, 2006. "Brands and Branding: Research Findings and Future Priorities," Marketing Science, INFORMS, vol. 25(6), pages 740-759, 11-12.
    29. Bibek Banerjee & Subir Bandyopadhyay, 2003. "Advertising Competition Under Consumer Inertia," Marketing Science, INFORMS, vol. 22(1), pages 131-144, January.
    30. Julio J. Rotemberg, 2010. "Empathy in salesperson-customer interactions," 2010 Meeting Papers 1099, Society for Economic Dynamics.
    31. Bagwell, Kyle, 2007. "The Economic Analysis of Advertising," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 28, pages 1701-1844, Elsevier.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tolotti, Marco & Yepez, Jorge, 2020. "Hotelling-Bertrand duopoly competition under firm-specific network effects," Journal of Economic Behavior & Organization, Elsevier, vol. 176(C), pages 105-128.
    2. Sebald, Alexander & Vikander, Nick, 2019. "Optimal firm behavior with consumer social image concerns and asymmetric information," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 311-330.
    3. Goldbaum, David, 2021. "The origins of influence," Economic Modelling, Elsevier, vol. 97(C), pages 380-396.
    4. Friedrichsen, Jana, 2013. "Image concerns and the provision of quality," Discussion Papers, Research Unit: Market Behavior SP II 2013-211, WZB Berlin Social Science Center.
    5. Vikander Nick, 2019. "Sellouts, Beliefs, and Bandwagon Behavior," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 19(1), pages 1-21, January.
    6. Lei Yan & Yuxiang Zhang & Shue Mei & Weijun Zhong, 2024. "Personalized pricing with persuasive advertising and the value of consumer information: a duopoly framework," Electronic Commerce Research, Springer, vol. 24(3), pages 1533-1562, September.
    7. Friedrichsen, Jana, 2016. "Signals sell: Designing a product line when consumers have social image concerns," Discussion Papers, Research Unit: Market Behavior SP II 2016-202, WZB Berlin Social Science Center.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stefan Buehler & Daniel Halbheer, 2011. "Selling when Brand Image Matters," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(1), pages 102-118, March.
    2. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899.
    3. Kretschmer, Tobias & Rösner, Mariana, 2010. "Increasing Dominance - the Role of Advertising, Pricing and Product Design," Discussion Papers in Business Administration 11500, University of Munich, Munich School of Management.
    4. Yan, Yingchen & Zhao, Qiuhong & Qin, Zhongfeng & Sun, Gaoji, 2022. "Integration of development and advertising strategies for multi-attribute products under competition," European Journal of Operational Research, Elsevier, vol. 300(2), pages 490-503.
    5. Song Lin, 2020. "Two-Sided Price Discrimination by Media Platforms," Marketing Science, INFORMS, vol. 39(2), pages 317-338, March.
    6. Maria Battaggion & Alessandro Vaglio, 2015. "Watchdogs, Platforms and Audience: An Economic Perspective on Media Markets," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 43(2), pages 209-228, June.
    7. Marco Antonielli & Lapo Filistrucchi, 2011. "Collusion and the political differentiation of newspapers," Working Papers 11-26, NET Institute, revised Nov 2011.
    8. Luís Cabral, 2011. "Dynamic Price Competition with Network Effects," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(1), pages 83-111.
    9. Marco Bertini & Daniel Halbheer & Oded Koenigsberg, 2012. "Self-Serving Behavior in Price-Quality Competition," Working Papers hal-01993405, HAL.
    10. Tsuyoshi Toshimitsu, 2017. "Optimal Timing of Advertising with Demand Spillovers," Journal of Industry, Competition and Trade, Springer, vol. 17(1), pages 43-60, March.
    11. Stühmeier, Torben & Wenzel, Tobias, 2011. "Getting beer during commercials: Adverse effects of ad-avoidance," Information Economics and Policy, Elsevier, vol. 23(1), pages 98-106, March.
    12. Charles Angelucci & Julia Cagé & Michael Sinkinson, 2024. "Media Competition and News Diets," American Economic Journal: Microeconomics, American Economic Association, vol. 16(2), pages 62-102, May.
    13. Charles Angelucci & Julia Cagé, 2019. "Newspapers in Times of Low Advertising Revenues," American Economic Journal: Microeconomics, American Economic Association, vol. 11(3), pages 319-364, August.
    14. Tolotti, Marco & Yepez, Jorge, 2020. "Hotelling-Bertrand duopoly competition under firm-specific network effects," Journal of Economic Behavior & Organization, Elsevier, vol. 176(C), pages 105-128.
    15. Simon P. Anderson & Joshua S. Gans, 2011. "Platform Siphoning: Ad-Avoidance and Media Content," American Economic Journal: Microeconomics, American Economic Association, vol. 3(4), pages 1-34, November.
    16. Paul Belleflamme & Martin Peitz, 2018. "Platforms and network effects," Chapters, in: Luis C. Corchón & Marco A. Marini (ed.), Handbook of Game Theory and Industrial Organization, Volume II, chapter 11, pages 286-317, Edward Elgar Publishing.
    17. Nelson Sá, 2015. "Market concentration and persuasive advertising: a theoretical approach," Journal of Economics, Springer, vol. 114(2), pages 127-151, March.
    18. Anna D’Annunzio & Antonio Russo, 2020. "Ad Networks and Consumer Tracking," Management Science, INFORMS, vol. 66(11), pages 5040-5058, November.
    19. repec:hal:spmain:info:hdl:2441/4edekc99or8n2bu86nu4ua8adl is not listed on IDEAS
    20. Anna D'Annunzio, 2013. "Vertical Integration in Two-Sided Markets: Exclusive Provision and Program Quality," DIAG Technical Reports 2013-16, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    21. Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2005. "Financing of Media Firms: Does Competition Matter?," CIE Discussion Papers 2005-08, University of Copenhagen. Department of Economics. Centre for Industrial Economics.

    More about this item

    Keywords

    advertising; social attitude; consumption externality; quality;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_3470. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.