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Informative Advertising and Optimal Targeting in a Monopoly

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  • Esteban, Lola
  • Gil, Agustin
  • Hernandez, Jose M
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    Abstract

    This paper analyzes how the transition from mass to specialized advertising can affect the market outcomes. To that end, we consider a particular technology of information transmission which allows a monopolist to decide the optimal targeting strategy. From this starting point, we show that the use of targeted advertising is likely to increase the market price and reduce the level of advertising, and that the degree of media specialization chosen by the monopolist tends to exceed the socially optimal. Furthermore, our model indicates that the social loss resulting from the greater monopoly power might exceed the gain due to the lower wasting of ads, in such a way that targeting could reduce consumer surplus and, what is more important, the level of social welfare. Copyright 2001 by Blackwell Publishing Ltd

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Journal of Industrial Economics.

    Volume (Year): 49 (2001)
    Issue (Month): 2 (June)
    Pages: 161-80

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    Handle: RePEc:bla:jindec:v:49:y:2001:i:2:p:161-80

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    Cited by:
    1. Lola Esteban & José Hernández, 2011. "Specialized advertising and price competition in vertically differentiated markets," SERIEs, Spanish Economic Association, vol. 2(2), pages 255-282, June.
    2. Rosa Branca Esteves, 2007. "Customer Poaching and Advertising," NIPE Working Papers 12/2007, NIPE - Universidade do Minho.
    3. Immordino Giovanni, 2009. "Advertising and Cost Reduction," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-15, April.
    4. Alexandre de Cornière, 2013. "Search Advertising," Economics Series Working Papers 649, University of Oxford, Department of Economics.
    5. Andrea Galeotti & José Luis Moraga-González, 2004. "A Model of Strategic Targeted Advertising," CESifo Working Paper Series 1196, CESifo Group Munich.
    6. Nick Vikander, 2011. "Targeted Advertising and Social Status," Tinbergen Institute Discussion Papers 11-016/1, Tinbergen Institute.
    7. repec:hal:wpaper:halshs-00575074 is not listed on IDEAS
    8. Rick Harbaugh & Rahul Khemka, . "Does Copyright Enforcement Encourage Piracy?," Claremont Colleges Working Papers 2000-14, Claremont Colleges.
    9. Maria Arbatskaya & Hideo Konishi, 2013. "Consumer Referrals," Boston College Working Papers in Economics 851, Boston College Department of Economics.
    10. Gomes, Orlando, 2006. "The dynamics of television advertising with boundedly rational consumers," MPRA Paper 2847, University Library of Munich, Germany.
    11. Maria Arbatskaya & Hideo Konishi, 2013. "Consumer Referrals," Emory Economics 1310, Department of Economics, Emory University (Atlanta).
    12. Lola Esteban & Jose M. Hernandez, 2007. "Strategic Targeted Advertising and Market Fragmentation," Economics Bulletin, AccessEcon, vol. 12(10), pages 1-12.
    13. Alexandre de Cornière & Romain De Nijs, 2013. "Online Advertising and Privacy," Economics Series Working Papers 650, University of Oxford, Department of Economics.
    14. Galeotti, Andrea & Moraga-González, José Luis, 2008. "Segmentation, advertising and prices," International Journal of Industrial Organization, Elsevier, vol. 26(5), pages 1106-1119, September.
    15. Lola Esteban & José Hernández, 2012. "Specialized advertising media and product market competition," Journal of Economics, Springer, vol. 106(1), pages 45-74, May.

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