Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2009-04-16
Number: 09-031/1
Author-Name: Marco A. Haan
Author-Workplace-Name: University of Groningen
Author-Name: Jose Luis Moraga-Gonzalez
Author-Workplace-Name: University of Groningen
Title: Advertising for Attention in a Consumer Search Model
Abstract: We model the idea that when consumers search for products, they first visit the firm whose advertising is more salient. The gains a firm derives from being visited early increase in search costs, so equilibrium advertising increases as search costs rise. This may result in lower firm profits when search costs increase. We extend the basic model by allowing for firm heterogeneity in advertising costs. Firms whose advertising is more salient and therefore raise attention more easily charge lower prices in equilibrium and obtain higher profits. As advertising cost asymmetries increase, aggregate profits increase, advertising falls and welfare increases.
Classification-JEL: D83, L13, M37
Keywords: Advertising, attention, consumer search, saliency
File-Url: https://papers.tinbergen.nl/09031.pdf
File-Format: application/pdf
File-Size: 964264 bytes
Handle: RePEc:tin:wpaper:20090031