Informative Advertising with Differentiated Products

  title={Informative Advertising with Differentiated Products},
  author={Gene m. Grossman and Carl Shapiro},
  journal={The Review of Economic Studies},
In this paper we study the role of promotional expenditures by sellers in a model of product differentiation. Advertising conveys full and accurate information about the characteristics of products. Heterogeneous consumers, who have no source of information other than advertisements, seek to purchase the products that best fit their needs. Despite the roles played by advertising in improving the matching of products and consumers, and in increasing the elasticity of demand faced by each firm… 
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