PRICE-COMPETITION AND ADVERTISING IN OLIGOPOLY

This paper studies price advertising in an oligopoly market where cons umers have only local price information. Sellers may attract consumers from other locations by advertising their price. With positive probab ility they advertise a low price to attract customers from distant loc ations; with the remaining probability they post a high price and serv e only local customers. The random advertising equilibrium approaches the equilibrium under perfect price information when the cost of adver tising becomes small.