By Gaurav — 14 Jul 2025 Photo by Arno Senoner / Unsplash Economists credit ads with two welfare‑enhancing roles:Informative – trimming search costs (Stigler 1961 (pdf)).Signaling – In classic models, high-quality sellers are more willing to incur large, sunk ad costs because they expect to recoup them through future sales—especially in experience-good markets where quality is learned over time (Nelson 1974). Milgrom and Roberts (1986) formalize this idea: when ad spend is costly and more valuabl...