The Expansion of Varieties in the New Age of Advertising

Salome Baslandze, Jeremy Greenwood and Ricardo Marto

No 2023-15, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: The last decades have seen large improvements in digital advertising technology that allowed firms to better target specific consumer tastes. This research studies the relationship among digital advertising, the rise of varieties, and economic welfare. We develop a model of advertising and varieties where firms choose the intensity of digital ads directed at specific consumers as well as traditional ads that are undirected. The calibrated model shows that improvements in digital advertising have driven the rise in varieties over time. Empirical evidence is presented using detailed micro data on firms' products and advertising choices for the 1995–2015 period. Causal analysis using exogenous variation in consumers' differential access to the internet supports the suggested mechanism.

Keywords: digital (directed) advertising; traditional (undirected) advertising; specialization; targeting; internet; varieties; welfare (search for similar items in EconPapers)
JEL-codes: E13 I31 L15 M37 O14 O31 (search for similar items in EconPapers)
Pages: 78
Date: 2023-09-28
New Economics Papers: this item is included in nep-ind and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published in 2023

Downloads: (external link)
https://www.atlantafed.org/-/media/documents/resea ... e-of-advertising.pdf (application/pdf)

Related works:
Journal Article: The Expansion of Varieties in the New Age of Advertising (2023)
Working Paper: The Expansion of Varieties in the New Age of Advertising (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedawp:96958

Ordering information: This working paper can be ordered from

DOI: 10.29338/wp2023-15

Access Statistics for this paper

More papers in FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta Contact information at EDIRC.
Bibliographic data for series maintained by Rob Sarwark ().