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A Model of Strategic Targeted Advertising

Galeotti, Andrea and lez, Jos eacute Luis Moraga-Gonz aacute (2004) A Model of Strategic Targeted Advertising. [UNSPECIFIED]

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We study a simultaneous move game of targeted advertising and pricing in a market with various consumer segments. In this setting we explore the implications of market segmentation on firm competitiveness. If firms are unable to target their ads on different consumer segments, a unique zero-profit equilibrium exists. By contrast, if firms employ targeted advertising, they can obtain positive profits. In equilibrium firms price very aggressively when they address the most profitable segment, quite gently when they target their ads on the least profitable segment and moderately aggressive when they advertise in the entire market.

Uncontrolled Keywords: segmentation, targeted advertising, oligopoly, price dispersion, price discrimination
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: 13 Nov 2018 14:15

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