Misleading advertising in mixed markets: non-profit orientation and welfare outcomes

Abstract In this article, we analyse misleading advertising competition between private firms (profit oriented) and consumer-oriented firms (concerned about consumer welfare) in the context of mixed markets. The nature of advertising in this article is assumed to be non-rival in nature and is beneficial to all the firms in the market. We find that, both private and consumer-oriented firms incur positive expenditure on misleading advertising. Further, the profit of consumer-oriented firms is higher than that of private firms. Moreover, irrespective of whether firms are concerned about consumer welfare or not, the level of misleading advertising is socially excessive.