Repetitive Advertising to Deter Entry

Abstract

This paper develops a model in which advertising not only informs consumers of brands, but also can influence consumer brand choices through its repetition. By examining a multi‐stage game in which two firms sequentially advertise before simultaneously setting a price, we show that repetitive advertising can be a legitimate entry‐deterrence weapon available to an incumbent in subgame perfect equilibrium. This demonstrates that firms’ conduct of advertising repetition has anticompetitive implications.