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Targeted information and limited attention

Author

Listed:
  • Andreas Hefti
  • Shuo Liu

Abstract

We examine the implications of limited consumer attention for the targeting decisions of competing firms. Limited attention alters the strategic role of information provision as firms may be incentivized to behave as mass advertisers, despite potentially perfect targeting abilities. We analyze the consequences of limited attention for market shares, information taxation, attention competition between firms, the value of marketing data to firms and strategic pricing. Accounting for limited attention in an otherwise standard targeting framework can explain several recent key issues from the advertising industry, such as increased consumer ad blocking, privacy concerns and information overload.

Suggested Citation

  • Andreas Hefti & Shuo Liu, 2016. "Targeted information and limited attention," ECON - Working Papers 230, Department of Economics - University of Zurich, revised Jun 2018.
  • Handle: RePEc:zur:econwp:230
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    File URL: http://www.econ.uzh.ch/static/wp/econwp230.pdf
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    References listed on IDEAS

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    1. Bachi, Benjamin & Spiegler, Ran, 2018. "Buridanic competition," Games and Economic Behavior, Elsevier, vol. 107(C), pages 298-315.
    2. Ben Elhadj-Ben Brahim, Nada & Lahmandi-Ayed, Rim & Laussel, Didier, 2011. "Is targeted advertising always beneficial?," International Journal of Industrial Organization, Elsevier, vol. 29(6), pages 678-689.
    3. Anindya Ghose & Sha Yang, 2007. "An Empirical Analysis of Search Engine Advertising: Sponsored Search and Cross-Selling in Electronic Markets," Working Papers 07-35, NET Institute, revised Sep 2007.
    4. Andreas M. Hefti, 2011. "Attention competition," ECON - Working Papers 028, Department of Economics - University of Zurich.
    5. Rosa Branca Esteves & Joana Resende, 2011. "Competitive Targeted Advertising with Price Discrimination," NIPE Working Papers 08/2011, NIPE - Universidade do Minho.
    6. Falkinger, Josef, 2007. "Attention economies," Journal of Economic Theory, Elsevier, vol. 133(1), pages 266-294, March.
    7. Dirk Bergemann & Alessandro Bonatti, 2011. "Targeting in advertising markets: implications for offline versus online media," RAND Journal of Economics, RAND Corporation, vol. 42(3), pages 417-443, September.
    8. Glenn Ellison & Sara Fisher Ellison, 2009. "Search, Obfuscation, and Price Elasticities on the Internet," Econometrica, Econometric Society, vol. 77(2), pages 427-452, March.
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    Cited by:

    1. Andreas Hefti, 2016. "Distributional comparative statics with heterogeneous agents," ECON - Working Papers 237, Department of Economics - University of Zurich.

    More about this item

    Keywords

    Targeted advertising; limited attention; ad avoidance; salience competition; privacy concerns;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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