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Comparative Advertising

Detail Summary
Date 10 March 2008
Time 11:45 - 13:00

Abstract

Consumer information on products affects competition and profits. We analyze firms' decisions to impart product information through advertising: comparative advertising also allows them to impart information about rivals' products. If firms sell products of similar qualities, both want to advertise detailed product information that enables consumers to determine their matches: there is no role for comparative advertising. If qualities are sufficiently dissimilar, the high-quality one will not want to disclose match information. If legal, the low-quality firm rival would like to advertise match information about its rival. Such "comparative" advertising may have a detrimental impact on welfare by leading more consumers to consume the low quality product: this effect can dominate the benefits from improved consumer information and reduce social welfare if qualities are different enough.

anderson2

The second paper to be discussed is called "Getting into Your Head(ache): Advertising Content for OTC Analgesics" ; with Federico Ciliberto and Jura Liaukonyte

Abstract

The over-the-counter analgesics market is characterized by substantial advertising expenditures by the top brands. Advertising-to-sales ratios in this industry range from 20-50%, and are more than 7 times higher than the average for all industrial sectors. We use a novel dataset where we code the product characteristics featured in advertisements. For comparative advertisements, we record the rival products mentioned as well as the characteristics used for comparisons. We provide a comprehensive, five-year description of the number and types of characteristics mentioned in ads as well as the ad expenditures spent on emphasizing particular characteristics. The content analysis
highlights the role of di¤erent types of advertising in enhancing product di¤erentiation. We then consider some theoretical hypotheses and test them with our data. First, we find that leading brands will be targeted most. Second, the fraction of comparative advertising is highest for new brands, and those with low market shares. Third, comparative advertising targets rival brands rather than stablemates. Fourth, there is only limited support for the idea that each characteristic will be advertised by only one product. However, we find that nationally advertised brands tend to specialize in which characteristics they advertise the most. Fifth, comparative advertising claims are more likely for experience rather than credence attributes. Finally, we find that usually comparative advertising targets products with active ingredients different from that of the attacking product.

anderson21
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