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1.25.11 Class Reading Summary

1.25.11 Class Reading Summary - sensitivity lower prices...

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1.25.11 Overall Theme Advertising = Market Power model, advertising is thought to influence consumer tastes, establish brand loyalty, and ultimately raise profits and consumer prices by decreasing price sensitivity and competition. In the Advertising = Information model, advertising is seen as providing information to consumers, resulting in increased price
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Unformatted text preview: sensitivity, lower prices, and reduced monopoly power • Complications to the two models: 1. Several contradictory ways of understanding the causal relationship between advertising and price 2. Difficulty in estimating the relationship between advertising and price premium 3. Brand loyalty has uncertain/unclear implications 4. Impact of the Internet...
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