This paper studies advertising in vertically differentiated product markets with positive consumption externalities. In … consumers. In such markets, we show that firms will engage in advertising competition in order to convince consumers of their … levels of advertising. …

characteristics and more concerned about hidden quality characteristics. Online retailers rely more on advertising than traditional …. Advertising and revenue data for the online book market reveal that consumers respond to advertising rather than low prices. As … the market increases, advertising costs escalate and there is no new entry. Advertising to sales ratios and market …

reexamines the debate as to whether firms use price or advertising to signal quality and whether advertising has pro- or anti …-competitive effects. We show that the signaling theory strongly predicts that advertising signals quality if price rivalry prevails, in …; combined price-advertising signals must be used when this difference shrinks. From a welfare point of view, advertising leads …

We extend the theory of advertising as a quality signal, using a model where an entrant can choose to advertise by … comparing its product to that of an established incumbent. Comparative advertising, comparing quality of one’s own product to … misleading. We show that comparative advertising can be a signal in instances where generic advertising is not viable. …

This paper studies advertising in vertically differentiated product markets with positive consumption externalities. In … consumers. In such markets, we show that firms will engage in advertising competition in order to convince consumers of their … levels of advertising. …