The informativeness of on-line advertising
AbstractSending general advertisements with inflationary claims may attract additional visitors with whom an advertiser is poorly matched. This is costly when ads are priced per-click because many visitors (clickers) will not purchase. This renders per-click advertising particularly conducive to the transmission of information via ads. The admissibility of information transmission depends not only on advertiser behaviour, but also upon consumers' interpretation of and trust in ads. In less conducive environments, consumers quickly learn to place little stock in the claims they see advertised. This mechanism undermines the ability of advertisers and consumers to communicate under per-impression or per-sale fee structures. Consumers benefit from increased informativeness, but distortions introduced by the market power given to advertisers imply that society may be better-off with no information transmission taking place.
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Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Industrial Organization.
Volume (Year): 29 (2011)
Issue (Month): 6 ()
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Web page: http://www.elsevier.com/locate/inca/505551
Obfuscation; Advertising; Cheap talk; Performance-based pricing;
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- L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
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