Advertising bidding involving consumer information sharing

As of recently, consumers can actively manage their level of individual-level information sharing, making the advertising bidding decision more complicated. In this paper, we study the advertising bidding decisions under the assumption that consumers can manage the level of their information sharing. Using a Salop city model to capture consumers’ prior product preferences, we firstly find that whether a targeted advertisement or a mass advertisement is the optimal advertising type in a duopoly hinges on the neighbor seller’s price and the level of consumer information sharing. Secondly, when we consider several sellers in an oligopoly, we find that the level of consumer information sharing affects the advertising bidding among different sellers. Thirdly, we compare the performance of a mass advertisement versus a targeted advertisement by numerical analysis in an oligopoly. We find that the targeted advertisements always perform better than mass advertisements in achieving optimal profit for both dominant sellers and non-dominant sellers in an oligopoly. Finally, we also discuss the regulatory implications for firms using consumer information as well as the managerial implications.