Targeted advertising with consumer search: an economic analysis of keywords advertising
This 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.
|Date of creation:||Nov 2009|
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- Van Zandt, Timothy, 2001.
"Information Overload in a Network of Targeted Communication,"
CEPR Discussion Papers
2836, C.E.P.R. Discussion Papers.
- 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.
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