Targeted advertising with consumer search: an economic analysis of keywords advertising
AbstractThis article investigates the role of a search engine as an intermediary between firms and consumers. Search engines enable firms to target consumers who have revealed some specific needs through their query. In a framework with horizontal product differentiation, imperfect product information and in which consumers incur search costs, I show that introducing a "neutral" targeted advertising mechanism reduces social inefficiencies and tends to reduce the equilibrium price. Moreover, the accuracy of the mechanism has a non monotonic effect on the price of the good: the price is lowest when the accuracy is intermediate.
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Date of creation: Nov 2009
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search-engine ; targeted advertising ; consumer search; product differentiation;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-19 (All new papers)
- NEP-COM-2011-03-19 (Industrial Competition)
- NEP-IND-2011-03-19 (Industrial Organization)
- NEP-MKT-2011-03-19 (Marketing)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Timothy Van Zandt, 2004.
"Information Overload in a Network of Targeted Communication,"
RAND Journal of Economics,
The RAND Corporation, vol. 35(3), pages 542-560, Autumn.
- Van Zandt, Timothy, 2001. "Information Overload in a Network of Targeted Communication," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2836, C.E.P.R. Discussion Papers.
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