In their seminal paper, Grossman and Shapiro (1984) assume that it is not profitable for a firm to deviate to the supercompetitive price of Salop (1979). In this paper, it is shown that this assumption is violated if, roughly, each firm reaches less than half of all consumers unless it is a...

In their seminal paper Grossman and Shapiro (1984) find that informative advertising is socially excessive in an oligopoly (entry is also socially excessive). However, the analysis assumed that all consumers receive at least one advertisement. Christou and Vettas (2008), among others, present...

Asymmetric information is a classic example of market failure that undermines the efficiency associated with perfectly competitive market outcomes: the “lemons” market. Credible certification, that substantiates unobservable characteristics of products that consumers value, is often...

Production runs suffer from inadvertent quality variation. There are good apples; there are bad apples (also known as “seconds”). The Alchian-Allen theorem states that a common perunit charge on two goods differentiated only by quality, increases the relative export demand for the higher...

In his textbook Tirole (1988, pp. 291-294) presents a model of advertising with Hotelling duopolists. It has been inferred (e.g., Bagwell, 2007) that in the competitive equilibrium derived, there can be socially too little advertising. It is shown that given the assumptions in Tirole (1988),...

In their seminal paper, Grossman and Shapiro (1984) find that informative advertising is socially excessive in an oligopoly pure-strategy symmetric equilibrium (PSSE). However, their analysis assumed that every consumer receives at least one advertisement. Christou and Vettas (2008) present...

In his textbook Tirole (1988, pp. 291-294) presents a model of advertising with Hotelling duopolists. A condition for there to be socially too little advertising is derived.

In his textbook Tirole (1988, pp. 291-294) presents a model of advertising with Hotelling duopolists. A condition for there to be socially too little advertising is derived.