ECON 101 Lecture Notes - Lecture 19: Nash Equilibrium, Market Power, Must Weight
Document Summary
Advertising is used to manipulate peoples tastes (psychological not informational) Impedes competition tries to convey products as being more different than they really are (increased perception of product differentiation) less elastic demand choices. Conveys price, location, and new products, allowing for consumers to make better. Fosters competition as customers are more informed of all firms in the market, gaining the ability to take advantage of price differentials, reducing the market power of firms. Willingness to spend on advertising conveys the quality of the product. Critics: brand names cause consumers to perceive differences that don"t exist. For: allow consumers to distinguish between the quality of products (increased expenditure on advertising = better product) Oligopoly: has few sellers, meaning the actions of any one seller in the market can have a large impact upon the profits of all the other sellers are independent in a way that competitive firms are not.
