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Informative Advertising in Directed Search

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  • Gomis-Porqueras, Pedro
  • Julien, Benoit
  • Chengsi, Wang

Abstract

We consider a directed search environment where capacity constrained sellers reach uncoordinated buyers through costly advertising while buyers observed all prices probabilistically. We show that: (i) the equilibrium advertising intensity has an inverted U-shape in market tightness, (ii) the equilibrium advertising intensity is higher under an auction mechanism than under posted pricing, and (iii) the equilibrium price and measure of informed buyers may {be positively correlated} even in large markets.

Suggested Citation

  • Gomis-Porqueras, Pedro & Julien, Benoit & Chengsi, Wang, 2012. "Informative Advertising in Directed Search," MPRA Paper 38057, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:38057
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    References listed on IDEAS

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    More about this item

    Keywords

    costly advertising; directed search; imperfect observability; sales mechanism;
    All these keywords.

    JEL classification:

    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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