Describe the role which advertising plays in the various market structures.

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thanatassa eNotes educator| Certified Educator

In a competitive market, advertising is one of the many tools firms use to compete with one another. Firms compete on many different fronts, including price, features, and brand loyalty. Advertising becomes a way to convince buyers to buy one product rather than another. It attempts to reach out to consumers and offer them persuasive information or appeals. Even when products are essentially identical, brands may compete by offering consumers other reasons to buy their products such as environmental or ethical concerns. A company that makes public its commitment to reducing its carbon footprint may attract consumers concerned about global climate change. Subaru was a pioneer in running a gay-themed advertising campaign in the 1990s, when no other car companies catered to the LBGTQ market, and has consistently increased its market share among people interested in LBGTQ and similar progressive causes.

In the case of an oligopoly, in which price fixing is common, advertising is one of the few ways to increase market share and compete. 

It might seem odd to bother advertising in a monopoly, but even utilities, which are natural monopolies, advertise. Monopolies use advertising to increase revenue by selling either more of the same product or additional features. In the case of utility companies, advertising may also try to persuade people to use less of a product. In hot climates, peak electrical use occurs on summer days. The higher peak use, the more companies need capacity that is not used at other times, increasing their costs. Thus many power companies actually run ads trying to educate consumers about how to use less power.

pohnpei397 eNotes educator| Certified Educator

In perfect competition, advertising plays no part.  The product being made is homogeneous and therefore there is no point in advertising.  Advertising would only raise a producer's costs and, since the producer is a price-taker, those costs could not be passed on to the consumer.

In monopolistic competition and in some instances of oligopoly, advertising is necessary.  It is needed in order to differentiate the product of one company from that of its competitors.  Each producer must try to demonstrate that its product is better than the others' products.

Many people might think that advertising is not important for a monopoly because consumer have to buy from that monopoly.  However, this is not completely true.  Consumers do still have the choice of buying or not buying so the producer may still want to advertise to create demand.  In the case of a government-granted and regulated monopoly, advertising can help to create goodwill in consumers and therefore make it more likely that the monopolist will continue to be favored by the government.

syamaladevi | Student

The various types of marketing structures includes perfect competition,orice discrimination,oligopoly,monopolistic and monopoly structures. Advertising plays an important role in all these marketing structures.

In the past each individual agency offered a variety of marketing  services under a single roof, but now a days due to the rapid expansion of media industry since the mid 1980's through cable and digital channels etc., encouraged for the rise of many new agencies and it increased heavy competition in the markets. so each company is advertising their products importance through advertising and making the people to get the awareness of their products. adververtising helps a company to reach its targets.

In perfect competitive markets the consumers get the knowledge of a particular product through advertising by the firm since the same product is sold by many other firms.