Whelan, Adele (2014) Advertising in Markets with Consumption Externalities. PhD thesis, National University of Ireland Maynooth.

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Abstract

This paper extends the entry deterrence literature by examining coordinating advertising in markets with consumption externalities using a stochastic success function. Optimal advertising and pricing strategies are analysed when an incumbent firm faces a challenger with a product of equal quality. I show that strategic entry deterrence using advertising is possible and optimal entry deterrence involves strategic pre-commitment to over-investment relative to the non-strategic simultaneous advertising benchmark. I show that when entry deterrence is not possible the incumbent does not possess a first mover advantage and optimal entry accommodation involves strategic investment in advertising followed by aggressive price competition congruent with the non-strategic simultaneous advertising benchmark. The findings suggest that an incumbent’s ability to deter entry through coordinating advertising in a market with products of equal quality is sensitive to the size of the fixed cost of entry that the challenger must incur and the consumption externality parameter.

Item Type:	Thesis (PhD)
Keywords:	Markets; Consumption Externalities;
Academic Unit:	Faculty of Social Sciences > Economics, Finance and Accounting
Item ID:	5375
Depositing User:	IR eTheses
Date Deposited:	08 Sep 2014 15:47
URI:
Use Licence:	This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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