Gomis-Porqueras, Pedro and Julien, Benoit and Wang, Chengsi (2010): Pricing, Advertising, and Market Structure with Frictions.
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This paper develops a model of pricing and advertising in a matching environment with capacity constrained sellers and uncoordinated buyers. Sellers' search intensity attracts buyers only probabilistically through costly informative advertisement. Equilibrium prices and proﬁt maximizing advertising levels are derived and their properties analyzed. The model generates an inverted U-shape relationship between individual advertisement and market tightness which is robust to alternative advertising technologies. The well known empirical fact in the IO literature reﬂects the trade-off between price and market tightness-matching effects. Finally, in this environment we can alleviate the discontinuity problem, allowing for unique symmetric equilibrium price to be derived.
|Item Type:||MPRA Paper|
|Original Title:||Pricing, Advertising, and Market Structure with Frictions|
|English Title:||Pricing, Advertising, and Market Structure with Frictions|
|Keywords:||Directed searching, Advertising, Pricing,Market structure|
|Subjects:||L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets
M - Business Administration and Business Economics; Marketing; Accounting > M3 - Marketing and Advertising > M37 - Advertising
|Depositing User:||Chengsi Wang|
|Date Deposited:||19. Oct 2010 09:58|
|Last Modified:||12. Feb 2013 19:34|
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