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Generic Advertising in an Asymmetric Cournot Oligopoly
Author(s) -
Zheng Yuqing,
Bar Talia,
Kaiser Harry M.
Publication year - 2010
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1093/ajae/aap032
Subject(s) - cournot competition , oligopoly , disadvantaged , microeconomics , economics , informative advertising , welfare , social welfare , market share , business , industrial organization , advertising , marketing , online advertising , native advertising , market economy , the internet , world wide web , computer science , political science , law , economic growth
We examine how benefits of mandated generic advertising vary with firm size in an asymmetric Cournot oligopoly market. Generic advertising, funded through a mandatory assessment, changes demand but also increases firms’ costs. The effect on a firm's profits depends upon the nature of the change in demand and the company's market share. Situations are identified in which generic advertising: (1) disproportionately favors large (small) firms; (2) decreases profits; and (3) increases (decreases) social welfare. Our findings explain the concerns that are often raised on small firms being disadvantaged by generic advertising. We discuss implications for policy and for firms’ advertising strategies.