Chap. 17
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Chap. 17

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Chap. 17 Chap. 17 Presentation Transcript

  • Chapter 17 Monopolistically Competition The Debate over Advertisement
  • The critique of advertising
    • Control people’s tastes
    • More psychological than informational
    • Convince people than their product is unique and efficient although it might not be true
  • The Defense of Advertisement
    • Provide information to customers, so that they can make better choices
    • Make market more competitive
  • Does advertisement means quality?
    • Economist says that advertisement means that it ensures quality.
    • Rational theory is that firms who are confident about the quality of their products advertise
    • but firms whose product is a mediocre choose to improve the quality instead of advertising.
  • What do people think about advertisement
  • Brand Names
    • Willingness to pay for consumers is higher for specific brand names.
    • Brand names provide consumers with information about quality when quality cannot be judged in advance