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Essays on Economics of Advertising
Valei, Azamat ; Žigić, Krešimir (advisor) ; Etro, Federico (referee) ; Kováč, Eugen (referee)
The dissertation studies two topics in economics of advertising in the framework of Industrial Organization. Particularly, it considers a role of advertising in the markets with network externalities in consumption and advertising as a strategic response of incumbent to new entry. The first chapter investigates the incentives for a monopolistic firm producing a good with network externalities to advertise when consumers face imperfect information and therefore must search to realize their actual willingness to pay for this good. A firm may disclose market information through advertising if it finds it beneficial. The results suggest that advertising is more likely in the case of a negative network effect and less likely with a positive network effect. When a monopolist faces a strong network externality, it chooses to support a maximum possible network and charge a price equal to the value of the externality. Finally, depending on the value of the search cost and the type of the network externality, a monopolist may use different advertising content: no information, price information only, product characteristics or both price and product characteristics. Specifically, if all consumers have the same search cost, as the search cost grows the firm must include more information in the advertising content....
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