Advertising Informative -information on existence, characteristics, price Persuasive -change consumer preferences Both forms can be used to differentiate products

Search goods -goods whose features a consumer can determine prior to purchase Usually informative advertising Experience goods - goods whose features a consumer can only learn through consumption Advertising for these goods may signal unobservable product quality

Entry Deterrence Strategies

Product proliferation Produce different varieties in an effort to crowd the market May not be credible if exit is cheap -incumbent’s threat to stay in market upon entry of competitor may not be credible -need some form of commitment to stay in industry—exit must be costly

Exclusive Dealing Contracts Contract specifying that seller is sole source for buyer Upsets antitrust authorities But, buyer entered into contract voluntarily -must be compensated for loss of alternative and less costly source of supply