IDEAS home Printed from https://ideas.repec.org/p/ags/aaea10/61326.html
   My bibliography  Save this paper

Dynamic Informative Advertising of New Experience Goods

Author

Listed:
  • Saak, Alexander E.

Abstract

This paper analyzes the optimal informative advertising and price policies of a monopolist who sells a new experience good over time to a population of heterogeneous buyers. Under certain conditions, the advertising rate first increases and then decreases over the marketing cycle with a peak occurring at the end of the introductory period when prices are low. Advertising lowers introductory prices but also shortens the period during which they are offered. Advertising raises the share of consumers who know their valuation in the long-run but not necessarily in the short-run

Suggested Citation

  • Saak, Alexander E., 2010. "Dynamic Informative Advertising of New Experience Goods," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61326, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea10:61326
    DOI: 10.22004/ag.econ.61326
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/61326/files/Dynamic%20Ad%20AAEA%202010%20Selected%2011852.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.61326?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Simon P. Anderson & Régis Renault, 2006. "Advertising Content," American Economic Review, American Economic Association, vol. 96(1), pages 93-113, March.
    2. Kapil Bawa & Robert Shoemaker, 2004. "The Effects of Free Sample Promotions on Incremental Brand Sales," Marketing Science, INFORMS, vol. 23(3), pages 345-363, November.
    3. Gene M. Grossman & Carl Shapiro, 1984. "Informative Advertising with Differentiated Products," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(1), pages 63-81.
    4. Tülin Erdem & Michael P. Keane, 1996. "Decision-Making Under Uncertainty: Capturing Dynamic Brand Choice Processes in Turbulent Consumer Goods Markets," Marketing Science, INFORMS, vol. 15(1), pages 1-20.
    5. H I Mesak & H Zhang, 2001. "Optimal advertising pulsation policies: a dynamic programming approach," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 52(11), pages 1244-1255, November.
    6. Simon P. Anderson & Federico Ciliberto & Jura Liaukonyte & Régis Renault, 2016. "Push-me pull-you: comparative advertising in the OTC analgesics industry," RAND Journal of Economics, RAND Corporation, vol. 47(4), pages 1029-1056, November.
    7. S. P. Sethi & A. Prasad & X. He, 2008. "Optimal Advertising and Pricing in a New-Product Adoption Model," Journal of Optimization Theory and Applications, Springer, vol. 139(2), pages 351-360, November.
    8. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-754, July/Aug..
    9. Simon P. Anderson & Régis Renault, 2006. "comparative Advertising," THEMA Working Papers 2006-18, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    10. Lewis, Tracy R & Sappington, David E M, 1994. "Supplying Information to Facilitate Price Discrimination," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 309-327, May.
    11. 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.
    12. M. L. Vidale & H. B. Wolfe, 1957. "An Operations-Research Study of Sales Response to Advertising," Operations Research, INFORMS, vol. 5(3), pages 370-381, June.
    13. Amir Heiman & Bruce McWilliams & Zhihua Shen & David Zilberman, 2001. "Learning and Forgetting: Modeling Optimal Product Sampling Over Time," Management Science, INFORMS, vol. 47(4), pages 532-546, April.
    14. Alexander E. Saak, 2008. "The Value Of Private Information In Monopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 56(1), pages 169-189, March.
    15. Dirk Bergemann & Juuso Välimäki, 2006. "Dynamic Pricing of New Experience Goods," Journal of Political Economy, University of Chicago Press, vol. 114(4), pages 713-743, August.
    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. Schumacher, Heiner, 2014. "Incentives through consumer learning about tastes," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 170-177.
    2. Celik, Levent, 2016. "Competitive provision of tune-ins under common private information," International Journal of Industrial Organization, Elsevier, vol. 44(C), pages 113-122.
    3. Ayca Kaya, 2013. "Dynamics of price and advertising as quality signals: anything goes," Economics Bulletin, AccessEcon, vol. 33(2), pages 1556-1564.

    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. Bing Jing, 2011. "Exogenous Learning, Seller-Induced Learning, and Marketing of Durable Goods," Management Science, INFORMS, vol. 57(10), pages 1788-1801, October.
    2. Alexander E. Saak, 2011. "A Model of Labeling with Horizontal Differentiation and Cost Variability," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(4), pages 1131-1150.
    3. Salvatore Piccolo & Piero Tedeschi & Giovanni Ursino, 2018. "Deceptive Advertising with Rational Buyers," Management Science, INFORMS, vol. 64(3), pages 1291-1310, March.
    4. 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.
    5. Régis Chenavaz & Sajjad M. Jasimuddin, 2017. "An analytical model of the relationship between product quality and advertising," Post-Print hal-01685892, HAL.
    6. Mikhail Drugov & Marta Troya‐Martinez, 2019. "Vague lies and lax standards of proof: On the law and economics of advice," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(2), pages 298-315, April.
    7. Ting Liu & Monic Jiayin Sun, 2007. "Informal Payments in Developing Countries' Public Health Sectors¤," Boston University - Department of Economics - Working Papers Series WP2007-032, Boston University - Department of Economics.
    8. Daniel Halbheer & Florian Stahl & Oded Koenigsberg & Donald R. Lehmann, 2013. "Digital Content Strategies," Working Papers 329, University of Zurich, Department of Business Administration (IBW).
    9. Grunewald, Andreas & Kräkel, Matthias, 2017. "Advertising as signal jamming," International Journal of Industrial Organization, Elsevier, vol. 55(C), pages 91-113.
    10. Agostino Manduchi, 2013. "Non-neutral information costs with match-value uncertainty," Journal of Economics, Springer, vol. 109(1), pages 1-25, May.
    11. Jyotishka Ray & Syam Menon & Vijay Mookerjee, 2020. "Bargaining over Data: When Does Making the Buyer More Informed Help?," Information Systems Research, INFORMS, vol. 31(1), pages 1-15, March.
    12. Archishman Chakraborty & Rick Harbaugh, 2014. "Persuasive Puffery," Marketing Science, INFORMS, vol. 33(3), pages 382-400, May.
      • Archishman Chakraborty & Rick Harbaugh, 2012. "Persuasive Puffery," Working Papers 2012-05, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    13. Halbheer, Daniel & Stahl, Florian & Koenigsberg, Oded & Lehmann, Donald R., 2014. "Choosing a digital content strategy: How much should be free?," International Journal of Research in Marketing, Elsevier, vol. 31(2), pages 192-206.
    14. Zhang, Tianle, 2010. "Advance-Purchase Programs: When to Introduce and What to Inform Consumers," MPRA Paper 25606, University Library of Munich, Germany.
    15. Jalili, Monire & Çil, Eren B. & Pangburn, Michael S., 2024. "Pricing and structuring product trials: Separate versus mixed wine tastings," European Journal of Operational Research, Elsevier, vol. 312(2), pages 668-683.
    16. Bharat Anand & Ron Shachar, 2009. "Targeted advertising as a signal," Quantitative Marketing and Economics (QME), Springer, vol. 7(3), pages 237-266, September.
    17. Schumacher, Heiner, 2014. "Incentives through consumer learning about tastes," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 170-177.
    18. Maria Alipranti & Evangelos Mitrokostas & Emmanuel Petrakis, 2013. "Comparative versus Informative Advertising in Oligopolistic Markets," Working Papers 1301, University of Crete, Department of Economics.
    19. Lyu, Chen, 2023. "Information design for selling search goods and the effect of competition," Journal of Economic Theory, Elsevier, vol. 213(C).
    20. Emir Kamenica & Matthew Gentzkow, 2011. "Bayesian Persuasion," American Economic Review, American Economic Association, vol. 101(6), pages 2590-2615, October.

    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:ags:aaea10:61326. 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: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.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.