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Extra info for Competition and Technological Change in the Television Industry: An Empirical Evaluation of Theories of the Firm
They are thus as much part of the process of demand management as an advertising campaign' (1974, pp. 208-9). Advertising is used to build brand or product loyalty, protecting brand share. New product development and related changes in sales strategy are primary means to secure or retrieve market share. Changes in these strategies involve fixed costs which may drive some firms out of business (Galbraith, 1974, p. 211; Needham, 1969, pp. 68-9). Pickering points out that there can be economies of scale in advertising and argues that under oligopoly there may be a ratchet effect in advertising 34 Economic Theory of the Firm expenditure, such that firms' expenditures can rise but do not readily fall (Pickering, 1974, pp.
One aspect of this is the need to establish a trademark or a brand name in the public consciousness (Bain, 1956, pp. ). To the extent that advertising in an oligopoly represents a fixed cost, small firms suffer a cost disadvantage if they advertise as much as larger rivals and a product differentiation disadvantage if they fail to do so. Clark argues that oligopolists tend to compete over visible aspects of quality because some aspects are 'inaccessible to mere inspection by the ordinary buyer' (1961, p.
Shepherd's description of stages in the life cycle of a 'utility' industry overlaps with that of Klein for the normal pattern of development of any industry, and elements of Shepherd's analysis may therefore be useful outside the area of 'utilities'. Klein describes a transition in new industries from 'fast history' in the early stages to 'slow history' later on, when less risky forms of innovation take place. He concurs with other writers that innovation tends to shift from products to processes, A 'Schumpeterian' Paradigm 41 and associates four types of rationality with the sequence of stages through which firms pass as an industry matures.