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Persuading Consumers with Social Attitudes

Type of publication Peer-reviewed
Publikationsform Original article (peer-reviewed)
Publication date 2012
Author Bühler Stefan, Halbheer Daniel,
Project Industrial Organization, Regulation, and the Foundations of Competition Policy
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Original article (peer-reviewed)

Journal Journal of Economic Behavior and Organization
Volume (Issue) 84(1)
Page(s) 439 - 450
Title of proceedings Journal of Economic Behavior and Organization

Abstract

This paper provides a formal analysis of persuasive advertising when firms compete for consumers with heterogenous social attitudes towards the consumption by others. Deriving product demand from primitives, we show that the demand-enhancing effect of persuasive advertising varies across consumers and increases in the average degree of conformity. In equilibrium, both quality and cost leaders choose higher advertising intensities and charge higher prices than their competitors. In addition, we show that an increase in the average degree of conformity among consumers reinforces asymmetries between firms.
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