Persuasive advertising and product differentiation

We suggest a simple framework for characterizing alternative ways that "persuasive advertising" may affect consumer preferences. We illustrate the implications of our theory-and contrast it with results from models of informative advertising-by analyzing the relationship between the degree of product differentiation and equilibrium levels of advertising. The analysis suggests that a positive relationship between equilibrium levels of advertising and (inherent) product substitutability is consistent only with advertising that "increases perceived product differences."