Strategic Informative Advertising In A Horizontally Differentiated Duopoly
Source: Charles University
When firms possess information about their competitors' products, their advertisements may leak extra information. The author analyzes this within a duopoly television market that lasts for two periods. Each station may advertise its upcoming program by airing a tune-in during the first program. Viewers may alternatively sample a program. The author finds that each station's equilibrium tune-in decision depends on both upcoming programs - thereby revealing more information than the actual content - when the sampling cost is sufficiently low. Otherwise, tune-in decisions are made independently. It is welfare improving to ban tune-ins in the latter case but not in the former.