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产业组织-AdvertisingMarketPowerandInformation
ECON4030 : Industrial OrganizationSpring 2011 Lecture Notes 13 Advertising, Market Power, and Information Kenny Teguh Pribadi BNU-HKBU United International College Modern Shopping Experience In early 20th century, shops were lacking of choices and consumers were not well-informed. “Modern” era of shopping, shops have many choices, and consumers are much better informed. Power of Mass Media. Advertising as strategic act. The Extent of Advertising Advertising = Manipulation? Advertising-Sales Ratio Positive correlation between profit level and advertising intensity level. Consumer goods industries tend to advertise more than those selling producer or intermediate goods. Advertising, Product Differentiation, and Monopoly Power (1) Studies of Kaldor (1950), Galbraith (1958), and Solow (1967) concluded that advertising is socially wasteful. Reasons : Preference Manipulation. Might increase firm’s monopoly power. Costly. Advertising, Product Differentiation, and Monopoly Power (2) Advertising increases firm’s market size. Economies of Scale High Concentration Industry. Joe Bain SCP Scholars : Advertising-Sales Ratio as Proxy for Barriers to Entry. Advertising, Product Differentiation, and Monopoly Power (3) Many studies confirmed the view. Is all advertising bad? Advertising Expenditure→Market Power? Market Power→Advertising Expenditure? Monopoly Firm’s Profit Maximizing Level of Advertising Informative Advertising (1) Shop Goods Relatively expensive. Infrequent purchases. Ex : cars, legal services, apartments. Convenience Goods Relatively inexpensive. Frequent purchases. Ex : cosmetics, shoes, shirts, drinks. Advertising is more influential to sales of convenience goods economically useful. Informative Advertising (2) Search Goods Little variation in quality. Time spent to search for the lowest price. Ex : mobile phones, table lamps. Experience Goods Necessity of First-Hand Experience. Ex : cosmetics, cars. Advertising will be more influenti
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