Advertising, Entry Deterrence, and Industry Innovation

This paper studies how advertising influences firms’ incentives to invest in R&D. The link between advertising and industry innovation is important, not only because advertising can spur R&D by spreading product knowledge, but also because advertising can discourage new innovative firms from entering the industry. This paper finds that a worse advertising technology can result in local improvements in industry innovation rates. Globally, however, a complete ban on advertising always reduce industry growth. This result is significant because industry advertising spending is quantitatively significant and there are potential connections between public policy towards advertising and R&D. This paper presents a variant of the Grossman and Helpman (1991) quality ladder model. The key difference is that the model in this paper allows advertising to gradually spread product awareness among consumers. This model differs from the entry deterrence literature by assuming perfect price discrimination. Technically, this assumption allows a fully tractable model and analytical characterization of a stationary equilibrium in a dynamic setting, which is not previously available. In terms of economic analysis, this assumption eliminates the extra profit incentives for new firms to enter early, and makes incumbent firms more inclined to use advertising as a deterrent.Advertising, Entry Deterrence, Innovation

Fermion Pairing across a Dipolar Interaction Induced Resonance

It is known from the solution of the two-body problem that an anisotropic dipolar interaction can give rise to s-wave scattering resonances, which are named as dipolar interaction induced resonaces (DIIR). In this letter, we study zero-temperature many-body physics of a two-component Fermi gas across a DIIR. In the low-density regime, it is very striking that the resulting pairing order parameter is a nearly isotropic singlet pairing and the physics can be well described by an s-wave resonant interaction potential with finite range corrections, despite of the anisotropic nature of dipolar interaction. The pairing energy is as strong as a unitary Fermi gas nearby a magnetic Feshbach resonance. In the high density regime, the anisotropic effect plays an important role. We find phase transitions from singlet pairing to a state with mixed singlet and triplet pairing, and then from mixed pairing to pure triplet pairing. The state with mixed pairing spontaneously breaks the time-reversal symmetry.Comment: 4.5 pages, 4 figures, figures updated, minor changes in tex