Informative and Persuasive Advertising in a Search-Theoretic Context

Student: Lavrentev Daniil

Supervisor: Georgy Lukyanov

Faculty: International College of Economics and Finance

Educational Programme: Double degree programme in Economics of the NRU HSE and the University of London (Bachelor)

Final Grade: 7

Year of Graduation: 2019

The purpose of this study is to analyze persuasive and informative types of advertising in theoretic Burdett & Judd (1983) model of simultaneous search. We are particularly interested in the relationship between the types of advertising costs and a price dispersion. We consider a market of consumer goods with a price-setting duopoly where firms charge prices independently and have an ability to spend money on advertisement and consumers have costs on acquiring information. We also make comparative statics of profits and extent of price distribution between two cases of advertising. As an extension to the paper we also review how a collusion or an increase in the number of firms in the market influences price dispersion.

Full text (added June 13, 2019)

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