This paper studies the competitive role of list prices. We argue that such prices are often more salient than actual retail prices, so consumers' purchase decisions may be influenced by them. Two firms compete by setting prices in a homogeneous product market. They first set a list price that...

We investigate the impact of advertising in a static differentiated duopoly. First, we consider the Nash equilibrium if firms compete with both prices and advertising. Second, we examine the Nash equilibrium if firms only compete in prices and do not advertise. We characterize the circumstances...