For citation:
Zazdravnykh, A. V., & Gudkova, T. V. (2020). Information Differentiation and Barriers to Entry. Zhurnal Economicheskoj Teorii [Russian Journal of Economic Theory], 17 (4), 874-890.
Abstract:
The economic effects of information differentiation attracted much scholarly attention in the second half of the 20th century. These studies mostly dealt with the impact of differentiation strategies on market structure and the competitive environment. In recent years, however, despite the rapid development of modern technologies used for promotion and communication with consumers and the emergence of new opportunities for using differentiation strategies in competition, there has been a decline in interest in this issue. This article discusses how information advantages of firms are formed and analyzes the influence of differentiation tools on restraints of competition and limitations on entry. The article assesses the influence of information, reputation, and consumer loyalty asymmetry factors on entry barriers and shows the relationship between the level of strategic investment in advertising and market concentration parameters. These factors should be analyzed in order to improve antitrust policies. At the same time, alternative views on the potential of information differentiation as an entry barrier are presented such as the positive impact of the information contained in advertising on the elasticity of demand, consumer awareness, and competition. It is shown that competition agencies should be especially careful when intervening in the advertising strategies of firms. The article also discusses the impact of digitalization processes on modern tools and methods of information differentiation as well as the corresponding entry barriers.
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