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    Advertising in Markets with Consumption Externalities


    Whelan, Adele (2014) Advertising in Markets with Consumption Externalities. PhD thesis, National University of Ireland Maynooth.

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    Abstract

    This paper extends the entry deterrence literature by examining coordinating advertising in markets with consumption externalities using a stochastic success function. Optimal advertising and pricing strategies are analysed when an incumbent firm faces a challenger with a product of equal quality. I show that strategic entry deterrence using advertising is possible and optimal entry deterrence involves strategic pre-commitment to over-investment relative to the non-strategic simultaneous advertising benchmark. I show that when entry deterrence is not possible the incumbent does not possess a first mover advantage and optimal entry accommodation involves strategic investment in advertising followed by aggressive price competition congruent with the non-strategic simultaneous advertising benchmark. The findings suggest that an incumbent’s ability to deter entry through coordinating advertising in a market with products of equal quality is sensitive to the size of the fixed cost of entry that the challenger must incur and the consumption externality parameter.

    Item Type: Thesis (PhD)
    Keywords: Markets; Consumption Externalities;
    Academic Unit: Faculty of Social Sciences > Economics, Finance and Accounting
    Item ID: 5375
    Depositing User: IR eTheses
    Date Deposited: 08 Sep 2014 15:47
    URI:

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