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Price Discrimination and Targeted Advertising: A Welfare Analysis

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  • Rosa Branca Esteves
  • Paulo Guimaraes

Abstract

: This paper presents a monopolistic model of price discrimination by means of targeted informative advertising. Targeting is defined as the ability of the firm to direct messages with different contents to different segments of consumers. Segmentation is based on different valuations of the firm s product. The monopolist chooses the level of advertising for each segment of consumers and discriminates price accordingly. The paper shows that when targeting is imperfect the monopolist will over advertise to the highest valuation group of consumers to the detriment of the lowest valuation group. Only when targeting is perfect will the seller behave in a socially desirable manner.

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Bibliographic Info

Article provided by IUP Publications in its journal The IUP Journal of Applied Economics.

Volume (Year): VII (2008)
Issue (Month): 5 (September)
Pages: 41-47

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Handle: RePEc:icf:icfjae:v:07:y:2008:i:5:p:41-47

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Cited by:
  1. Aslan Zorlu & Joop Hartog, 2005. "The effect of immigration on wages in three european countries," Journal of Population Economics, Springer, Springer, vol. 18(1), pages 113-151, December.
  2. Elvira Lima & Teresa J. Esquerdo, 2003. "The economic costs of alcohol misuse in Portugal," NIMA Working Papers, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho 24, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
  3. Ana Rute Cardoso & Priscila Ferreira, 2009. "The dynamics of job creation and destruction for university graduates: why a rising unemployment rate can be misleading," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 41(19), pages 2513-2521.
  4. Anabela Botelho & Ligia Costa Pinto, 2001. "Hypothetical, real, and predicted real willingness to pay in open-ended surveys: experimental results," NIMA Working Papers, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho 12, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
  5. Botelho, Anabela & Pinto, Ligia Costa, 2004. "Students' expectations of the economic returns to college education: results of a controlled experiment," Economics of Education Review, Elsevier, Elsevier, vol. 23(6), pages 645-653, December.
  6. Pedro Portugal & Ana Rute Cardoso, 2001. "Disentangling the minimum wage puzzle: an analysis of job accessions and separations from a longitudinal matched employer- employee data set," NIMA Working Papers, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho 9, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
  7. Ligia Costa Pinto & Glenn Harrison, 2000. "Multilateral negotiations over climate change policy," NIMA Working Papers, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho 1, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
  8. Paulo Guimaraes, 2001. "The state of Portuguese research in economics: an anlysis based on publications in international journals," NIMA Working Papers, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho 15, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
  9. Anabela Botelho, 2001. "Strategic behavior at trial-The production, reporting, and evaluation of complex evidence," NIMA Working Papers, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho 14, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
  10. Elvira Lima & David K. Whynes, 2003. "Finance and performance of Portuguese hospitals," NIMA Working Papers, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho 20, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
  11. Joao Cerejeira da Silva, 2002. "Identification of the Portuguese industrial districts," NIMA Working Papers, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho 17, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
  12. Anabela Botelho & Ligia Costa Pinto & Miguel Portela & Antonio Silva, 2001. "The determinants of success in university entrance," NIMA Working Papers, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho 13, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.

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