https://macropaperwarehouse.com/authors/ilwoo-hwang/Ilwoo HwangHugo -- gohugo.ioen-ushttps://macropaperwarehouse.com/papers/competitive-advertising-and-pricing/https://macropaperwarehouse.com/papers/competitive-advertising-and-pricing/<p>Hwang, Kim, and Boleslavsky study how firms in an oligopoly simultaneously choose prices and advertising strategies, where advertising is modeled as the choice of how much product information to disclose to consumers. The paper extends the canonical Perloff-Salop (1985) random-utility discrete-choice framework — in which n firms engage in Bertrand competition for a consumer whose value for each product is independently drawn from a common distribution F — by endogenizing the information environment: each firm may choose any mean-preserving contraction (MPC) of F as its advertising strategy, with no structural restriction on feasible content. This full flexibility, drawn from the information design literature, allows each firm to choose the consumer&rsquo;s effective value distribution, ranging from full information (choosing F itself) to complete concealment (a degenerate distribution at the mean). The model is silent on advertising costs, which are assumed to be zero throughout.</p>