Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2003-05-11
Number: 03-035/1
Author-Name: Andrea Galeotti
Author-Email: galeotti@few.eur.nl
Author-Workplace-Name: Econometric Institute, Erasmus University Rotterdam
Author-Name: Jose Luis Moraga
Author-Email: j.l.moraga.gonzalez@rug.nl
Author-Workplace-Name: Groningen University
Title: Strategic Targeted Advertising
Abstract: We present a strategic game of pricing and targeted-advertising. Firms cansimultaneously target priceadvertisements to different groups of customers, or to the entiremarket. Pure strategy equilibria do not exist and thus marketsegmentation cannot occur surely. Equilibria exhibit random advertising--to induce an unequal distribution of information in the market-- andrandom pricing --to obtain profits from badly informed buyers--. Wecharacterize a positive profits equilibrium where firms advertise lowprices to a segment of consumers, high prices to a distinct segment ofconsumers, and intermediate prices to the entire market. As a resultthe market is segmented only from time to time and presentssubstantial price dispersion across segments.
Classification-JEL: D43; D83.
Keywords: Targeted advertising; oligopoly; price dispersion; segmented markets.
File-Url: https://papers.tinbergen.nl/03035.pdf
File-Format: application/pdf
File-Size: 467915 bytes
Handle: RePEc:tin:wpaper:20030035