Managerial Economics and Strategy, 2/e

9.5 Advertising

You can fool all the people all the time if you have a big enough advertising budget.

In addition to setting prices or quantities and choosing investments, firms engage in many other strategic actions to boost their profits. One of the most important is advertising. By advertising, a monopoly can shift its demand curve, which may allow it to sell more units at a higher price. In contrast, a competitive firm has no incentive to advertise as it can sell as many units as it wants at the going price without advertising.

Advertising is only one way to promote a product. Other promotional activities include providing free samples and using sales agents. Some promotional tactics are subtle. For example, grocery stores place sugary breakfast ...