A Note on Socially Insufficient Advertising in Tirole’s Duopoly Model

Creane, Anthony (2019): A Note on Socially Insufficient Advertising in Tirole’s Duopoly Model.

Abstract

In his textbook Tirole (1988, pp. 291-294) presents a model of advertising with Hotelling duopolists. It has been inferred (e.g., Bagwell, 2007) that in the competitive equilibrium derived, there can be socially too little advertising. It is shown that given the assumptions in Tirole (1988), there cannot be socially too little advertising for this equilibrium.

• Item Type: MPRA Paper
• Language: English
• Keywords: informative advertising, existence, welfare
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search ; Learning ; Information and Knowledge ; Communication ; Belief ; Unawareness; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets

References

Bagwell, K., 2007. The Economic Analysis of Advertising. Handbook of Industrial Organization 2, Chapter 28, 1701-1844.

Christou, C. and N. Vettas, 2008, On Informative Advertising and Product Differentiation, International Journal of Industrial Organization, 26, 92-112.

Tirole, J, 1988, The Theory of Industrial Organization, MIT Press: Cambridge, MA.