Answered: 14.4. ADVERTISING AND BRAND SWITCHING.…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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PLEASE DO 14.4

Transcribed Image Text:mormational content can increase market efficiency. sich sony fall av IAD A 14.4. ADVERTISING AND BRAND SWITCHING. Empirical evidence suggests that the proba- bility of a household switching to a different brand of breakfast cereal is increasing in the advertising intensity of that brand. However, the effect of advertising is significantly lower for households who have previously tried that brand.21 What does this suggest about the nature of advertising expenditures (persuasion vs. information)? daimybe to stoolle stre 14.5. ADVERTISING INTENSITY. Consider the following industries: pharmaceuticals, cement, perfumes, fast food, compact cars. How would you expect them to be ordered by advertising intensity? Why? 14.6. PRODUCT POSITIONING AND PRICE COMPETITION. Consider a duopoly where horizon- tal product differentiation is important. Firms first simultaneously choose their prod- uct locations, then simultaneously set prices in an infinite series of periods. Suppose that firms collude in prices in the second stage and anticipate they will do so at the product-positioning stage. In this context, what do you expect the degree of product differentiation to be?22 CHALLENGING EXERCISES 14.7. PRICE COMPETITION WITH SEARCH COSTS. Twenty-five different stores sell the same product in a given area to a population of 2,000 consumers. Consumers are equally have no search costs and

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