Year of Graduation
Double degree programme in Economics of the NRU HSE and the University of London
The object of study is the influence of the information served by advertisement (about the firm’s location and price) on the equilibrium outcome in the market. Local consumers are initially unaware of the existence of the goods/services that the companies offer them, until they are reached by informative advertising, which conveys this information. The study presented a modified duopoly version of Grossman and Shapiro (1984), the classic study on informative advertising, by adding consumer search into the analysis. It showed that when consumers are ignorant, the findings may be surprisingly different – the companies in the market may advertise the monopoly price, but get little advertising compared to the social optimum. This ultimately depends on how differentiated consumers perceive the two companies and what are the cost for these companies to advertise.