Targeted advertising and costly consumer search.
We study targeting of advertising based on information about the consumer's likely ranking of products. Firms send ads to more promising consumers. Thus, targeting increases the expected willingness to pay for the product the consumer learns about but also reduces the expected differentiation of the...
| Publicado en: | Economic Inquiry Vol. 61; no. 2; pp. 430 - 451 |
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| Autores principales: | , |
| Formato: | Artículo |
| Publicado: |
Wiley-Blackwell
Apr2023
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| Materias: | |
| Acceso en línea: | Ver este registro en EBSCOhost |
| Sumario: | We study targeting of advertising based on information about the consumer's likely ranking of products. Firms send ads to more promising consumers. Thus, targeting increases the expected willingness to pay for the product the consumer learns about but also reduces the expected differentiation of these products. The two effects push search, and so prices, in opposite direction. The first effect is more important for lower search costs. The second is stronger the larger the number of products. The improved selection under targeting increases firms' profitability and so advertising effort. |
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