Targeted advertising with consumer search: an economic analysis of keywords advertising

Alexandre de Cornière ()

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Abstract: This article investigates the role of a search engine as an intermediary between firms and consumers. Search engines enable firms to target consumers who have revealed some specific needs through their query. In a framework with horizontal product differentiation, imperfect product information and in which consumers incur search costs, I show that introducing a "neutral" targeted advertising mechanism reduces social inefficiencies and tends to reduce the equilibrium price. Moreover, the accuracy of the mechanism has a non monotonic effect on the price of the good: the price is lowest when the accuracy is intermediate.

Keywords: search-engine; targeted advertising; consumer search; product differentiation (search for similar items in EconPapers)
Date: 2009-11
New Economics Papers: this item is included in nep-com, nep-ind and nep-mkt
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00575074v1
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Persistent link: https://EconPapers.repec.org/RePEc:hal:psewpa:halshs-00575074

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