If signalling is applied to advertising:
A)not all firms have the same incentive to advertise
B)firms ignore the possibility of repeated customers
C)it is irrational for a firm with a good product to pay for the cost of the signal
D)a firm with a good product reaps a relatively small benefit from advertising

Question

Quizplus · Accepted Answer

Signalling in advertising implies that firms with low-quality products may advertise more in order to signal to consumers that their product is of higher quality than it actually is. On the other hand, firms with high-quality products may not need to advertise as much since their product already speaks for itself. As a result, not all firms have the same incentive to advertise.

If Signalling Is Applied to Advertising