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Advertising conjectures and the nature of advertising competition in an oligopoly
Author(s) -
Seldon Barry J.,
Banerjee Sudip,
Boyd Roy G.
Publication year - 1993
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090140602
Subject(s) - oligopoly , cournot competition , advertising , competition (biology) , informative advertising , economics , microeconomics , market share , business , marketing , native advertising , online advertising , computer science , ecology , the internet , world wide web , biology
We estimate advertising conjectural variations within a simultaneous system that includes advertising and demand equations for cigarette manufacturers. This allows insight into advertising decisions in an oligopoly. The advertising conjectures are positive and statistically significant, indicating that firms do not hold Cournot conjectures as is usually assumed in theoretical models. Instead, firms perceive that their rivals will respond directly to their own advertising. We also find evidence that, while cigarette advertising rearranges market share by increasing firm‐level demand relative to rivals' demand, it also increases market demand for cigarettes. Hence there are positive spillovers from advertising in the cigarette industry.