Comparative and Targeted Advertising in Competitive Markets

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Submitted on 28 May 2009

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Comparative and Targeted Advertising in Competitive

Markets

Joanna Pousset

To cite this version:

Joanna Pousset. Comparative and Targeted Advertising in Competitive Markets. Sciences de l’Homme et Société. ENSAE ParisTech, 2008. Français. �pastel-00005167�

Comparative and Targeted Advertising

in Competitive Markets

Joanna Pousset

under the supervision of Pau Olivella Cunill

Dissertation submitted to

Departament d’Economia i d’Història Econòmica

Facultat de Ciències Econòmiques i Empresarials

Universitat Autònoma de Barcelona

in partial fulfillment of the requirements for the degree of

Doctor of Philosophy

Dedication

Acknowledgements

It is a pleasure to thank the many people who made this thesis possible.

In the first place, I would like to express my sincere gratitude to my advisor, Pau Olivella. His

ability to probe beneath the text is a true gift, and his insights have strengthened this study

significantly. I will always be thankful for his guidance, knowledge, dedication and remarkable

patience.

A special word of thanks to Prof. Ronald W. Jones, a friend, a mentor, and a cornerstone in my

professional development, who made me discover the world of economics and who transmitted to

me the urge to answer economic puzzles.

I would like to acknowledge the help of many people during my study. This thesis has benefited

greatly from valuable comments of David Pérez Castrillo and Xavier Martinez Giralt. Their

discussions, encouragement and critiques were of essence to the progress of this work. I also wish

to thank Dúnia López Pintado for providing inspiration for future research.

I am deeply grateful to several researchers at the organisations that I visited. In particular, I

would like to thank Yossi Spiegel, Simon P. Anderson, and Regis Renault for their interest in my

research, detailed discussions and encouragement in the area of advertising. I extend my

appreciation to researchers of CREST–LEI. Special thanks are due to Laurent Linnemer, Philippe

Fevrier and Thibaud Vergé. This thesis would not appear in its present form without their kind

assistance, readiness to help, thoughtful advice, and trenchant critiques. I would also like to thank

my co-author, Nathalie Sonnac, for enriching interaction, inspiration and fruitful discussions.

I have also benefited from many insightful suggestions from the participants of the International

IO Conference in Savannah, 2007, Workshops in Microeconomics at Universitat Autònoma de

Barcelona, and of other conferences and seminars.

I am indebted to my many student colleagues of Universitat Autònoma de Barcelona for

providing a stimulating and fun environment in which to learn and grow. Their true friendship

has been of great importance.

I am grateful to the staff of IDEA for their unconditional support, help, and their constant effort

to improve the quality of the PhD program.

I wish to thank my sister for helping me get through the difficult times, and for emotional

support.

Last but not least, I thank my husband who has been a constant source of support and patience

and has helped make everything possible.

The financial support from Generalitat de Catalunya, research project BEC2003-01132 (Spanish

Ministry of Education and Science) and research grant from CREST are gratefully

acknowledged.

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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

                                                                                                                                                                                                                                                                _                                                                                                                                                                                                                                                                                     _{      } 

List of Figures

2.1 The positions of firms on the unit circle. . . . 2.2 Market division among firms. . . . . . . . . 2.3 The effects of the degree of comparativeness of advertising on advertising volumes among firms A and B. . . . . . . . . . . . . 2.4 The effects of the degree of comparativeness of advertising on advertising efforts of firms A and B against firm C. . . . . . . . 2.5 The effects of the degree of comparativeness of advertising on advertising efforts of firm C against firms A and B. . . . . . . . 2.6 The effects of the degree of comparativeness of advertising on the aggregate advertising efforts. . . . . . .

3.1 Possible actions of the game. . . . . . . . 3.2 Demand configurations under no advertising. . . . 3.3 Configurations of parameters for which the equilibrium candidate falls in the interior of case 4. . . . . . . 3.4 Profit functions of each firm at the optimal price of the rival. . . . 3.5 Advertising decisions of firm H. . . . . . . . . . 3.6 The impact of advertising on price competition. . . . 3.7 The impact of price competition on the advertising decision of firm H. . . . . 3.8 Constellations of firm L's profits when her true quality is low. . . . 3.9 Constellations of firm L's profits when her true quality is high. . . .

4.1 An exemplary structure of the press market. . . . . 4.2 The demands for the industrial product as fractions of the magazines' demands. . 4.3 The impact of readers' devotion to the product on advertising rates. . . .

13 14 30 31 32 33 51 53 56 57 62 65 68 72 73 88 97 105

 



                                                                                                                                                                                                                                                                         

                                                                                                                                                                                                                                                                                                                                                                                                        

                                                                                                                                                                                                                                                                                                                                                                                                                                                             

                                                                                                                                                                                   

 

      

  

   

 

                                                                                                                                                                                                      

                                                                                   _                                                       _{   }                                                                                                _{  }                _{              }                                                                                    _{               }                                                  _{               }                                                          

                                                                                                                                          _                                                                                                                                                                                                                                           _{             }                                                          

                                                                                                                                                                                                                                                          _{            }                                                                                                                                        _{              }     

                           _{          }                                                                                                                                                                                                                                                                                                                                                                                                  _{             }                 