10.3 : 垄断竞争下的广告成本

In monopolistic competition, firms differentiate their products from those of competitors. Advertising is crucial in this process, as it helps firms explain to people, or make them believe, that their products are unique.

Consider Adidas and Nike. Both companies sell athletic shoes, but through advertising, they create loyal customers and distinct brand identities.

Advertising can make the demand for the products more inelastic, meaning loyal customers are less sensitive to price changes. 

For example, a loyal Nike customer might be willing to pay a premium for the latest Air Jordan release.

Alternatively, advertising can shift the demand curve to the right, increasing overall demand.

For instance, an effective Adidas campaign, like their "Impossible is Nothing" series, might attract customers and boost sales.

However, firms must carefully balance advertising costs with the expected revenue gains. While effective advertising can enhance product differentiation and brand recognition, it can also be a significant expense that needs to be managed wisely.