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Consumers’ Misevaluation and Public Promotion

Author

Listed:
  • Yamagishi Atsushi

    (Graduate School of Economics, The University of Tokyo, 7-3-1 Hongo, Bunkyo-ku, Tokyo, Japan)

Abstract

I analyze markets in which consumers may misestimate the true value of goods and the government can affect the valuation through public promotion. When entry of firms is not allowed, the government makes consumers overvalue the goods to mitigate welfare loss from underproduction in an oligopolistic market, provided that the promotion cost is sufficiently low. On the contrary, in a free-entry market, no matter how low the promotion cost is, the government may make consumers undervalue them in order not to induce wasteful entries despite the remaining underproduction problem. In addition, my result in a free-entry market suggests that the main finding of Glaeser and Ujhelyi (J Public Econ 94: 247-257, 2010)crucially depends on the barriers to entry and the opposite result may be obtained under free entry.

Suggested Citation

  • Yamagishi Atsushi, 2016. "Consumers’ Misevaluation and Public Promotion," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(4), pages 1-5, October.
    • Handle: RePEc:bpj:bejeap:v:16:y:2016:i:4:p:5:n:5
    DOI: 10.1515/bejeap-2016-0141
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    More about this item

    Keywords

    consumers' misevaluation; excess entry; public promotion;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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