Competitive persuasive advertising under consumer loss aversion

I present a model to describe the effects of persuasive advertising targeted at consumers with expectation-based reference-dependent preferences. Persuasive advertising is competitive and increases the salience of advertised products while decreasing the salience of competing products. Consumers' gain-loss utility associated with the expectation to buy the most salient product is inflated, while gain-loss utility associated with the expectation to buy the least salient product is deflated. I show that under moderate levels of loss aversion and product differentiation persuasive advertising has strictly anti-competitive effects, whenever consumers are aware of prices but uncertain about their individual match value from a purchase. (C) 2019 Elsevier B.V. All rights reserved.