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Cooperative and predatory advertising: Effects on oligopoly advertising investment

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Abstract

An oligopolist's advertising behavior depends upon the externalities generated. Negative externalities occur when the firm's advertising gains in sales are a result of a loss to the rest of the industry. On the other hand, positive externalities may result because advertising by any single firm may increase that firm's sales while at the same time increasing sales in the rest of the industry.

In the literature these types of externalities are referred to as "predatory advertising" and "cooperative advertising," respectively. Market shares are redistributed when advertising is purely predatory, and advertising is a public good when advertising is purely cooperative. The effect of advertising externalities on the firm's incentive to advertise is investigated in this paper.

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Authors and Affiliations

  1. Fayetteville State University, USA

    Yunkai Chen & A. J. Roayaei

  2. University of Texas at Dallas, USA

    Barry J. Seldon

Authors
  1. Yunkai Chen
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  2. A. J. Roayaei
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  3. Barry J. Seldon
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Chen, Y., Roayaei, A.J. & Seldon, B.J. Cooperative and predatory advertising: Effects on oligopoly advertising investment. Atlantic Economic Journal 21, 26–38 (1993). https://doi.org/10.1007/BF02302313

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