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Strategic Targeted Advertising

Galeotti, A and Moraga-Gonzalez, JL (2003) Strategic Targeted Advertising. UNSPECIFIED. Tinbergen Institute Discussion Papers 03-035/1.

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Abstract

We present a strategic game of pricing and targeted-advertising. Firms can simultaneously target price advertisements to different groups of customers, or to the entire market. Pure strategy equilibria do not exist and thus market segmentation cannot occur surely. Equilibria exhibit random advertising ?to induce an unequal distribution of information in the market-- and random pricing ?to obtain profits from badly informed buyers--. We characterize a positive profits equilibrium where firms advertise low prices to a segment of consumers, high prices to a distinct segment of consumers, and intermediate prices to the entire market. As a result the market is segmented only from time to time and presents substantial price dispersion across segments.

Item Type: Monograph (UNSPECIFIED)
Uncontrolled Keywords: Targeted advertising; oligopoly; price dispersion; segmented markets.
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 16 Jul 2012 14:40
Last Modified: 17 Aug 2017 18:10
URI: http://repository.essex.ac.uk/id/eprint/2997

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