Archive for the ‘Micro Economy’ Category

Role of Advertising in Imperfect Competition

Leo Burnett, an American businessman says;

A good basic selling idea, involvement and relevancy, of course, are as important as ever, but in the advertising din of today, unless you make yourself noticed and believed, you ain’t got nothin’.

Advertising is one of the primary instruments of marketing. In fact to advertize means to publicize the quality good. In economic jargon imperfect completion is such kind of market structure in which the necessary conditions for perfect competition are not met. In such a situation, a major component of demand is the influence of advertising and product differentiation. Differentiation may be based upon certain characteristics of the product itself, such as exclusive patented features; trade-marks, trade names; peculiarities of the package or container, if any; or singularity in quality, design, color, or style. It may also exist with respect to the conditions surrounding its sale.
The real world is populous with the examples of product differentiation. For example our markets are full of different memory foam companies but what makes their mattresses different from each other is the quality like the Sleepshaper’s Maxicool Mattress with Outlast technology is different from other mattresses in the market as it is designed to regulate temperature, with all the benefits of a memory foam mattress.

This combination is a breakthrough in support and temperature controlled comfort. Moreover its grooves create a more efficient airflow whilst ACTIGARD ensures the cover is permanently free of dust mites.
Similarly the quality of the Sleep-matters memory foam topper to give more years of sleep without the cost of replacing the existing mattress as it fits directly on top of your existing mattress and can be held in place with either a fitted sheet or mattress protector make it distinguish from the others in market.

But if this product differentiation is based on false advertising then it doesn’t only loose customer’s trust but also incurs high costs to firm. In a word advertising plays a vital role in imperfect market structure.

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