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    Consumption Externalities, Coordination, and Advertising

    Pastine, Tuvana (2002) Consumption Externalities, Coordination, and Advertising. The International Economic Review, 43 (3). pp. 919-943. ISSN 0020-6598

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    The aim of this article is to demonstrate that advertising can have an important function in markets with consumption externalities apart from its persuasive and informative roles. We show that advertising may function as a device to coordinate consumer expectations of the purchasing decisions of other consumers in markets with consumption externalities. The implications of advertising as a coordinating device are examined in the pricing and advertising decisions of firms interacting strategically. Although, at times, the one-period advertising expense can exceed the one-period monopoly profit, in equilibrium, consumers will pay a premium for the more heavily advertised brand.

    Item Type: Article
    Keywords: Consumption; Externalities; Coordination; Advertising;
    Academic Unit: Faculty of Social Sciences > Economics, Finance and Accounting
    Item ID: 8501
    Identification Number:
    Depositing User: Tuvana Pastine
    Date Deposited: 25 Jul 2017 14:04
    Journal or Publication Title: The International Economic Review
    Publisher: Wiley
    Refereed: Yes
    Use Licence: This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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