Advertising and Conformity. an Evolutionary Game Model

The paper analyses how advertising may influence consumer preferences. Using the methodology from evolutionary game theory, we allow consumers not to be fully rational. Consumers use the same strategy repeatedly, but revise their strategy occationally. They revise their strategy buy immitating successful others. Revising their strategy this way is optimal under certain condition. The analysis is based on the symbolic interactionism perspective, assuming that commodities are used as symbolic reinforcement of perceived identity. We further assume that consumers to some extent think of people they ”meet” at TV or other media as if they were real. An advertising strategy is thus to present successful others for consumers to immitate. We analyse this advertising strategy in a setting where consumers prefer consuming the same brand as their peer group. We find that advertising is required to introduce a new brand on the market. The welfare consequences of advertising depends on the spesific of the new product, but less advertising is needed if the product is welfare improving.