Informative advertising and entry deterrence: a Bertrand model

This paper shows that strategic entry deterrence via informative advertisin g is impossible in a game of sequential advertising followed by simultaneou s price setting in a homogenous-product market. It contrasts Schmalensee's [Journal of Political Economy, 91 (1983) 636-653] result that when the stra tegic variables at the post-advertising stage are quantities, not prices, o ptimal entry deterrence is possible and involves underinvestment in adverti sing. (C) 2000 Elsevier Science S.A. All rights reserved.