Distinct role of targeting precision of Internet-based targeted advertising in duopolistic e-business firms’ heterogeneous consumers market

Zhao Jiang, Wu Dan () and Liu Jie
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Zhao Jiang: Fudan University
Wu Dan: Keyi College of Zhejiang Sci-Tech University
Liu Jie: Fudan University

Electronic Commerce Research, 2020, vol. 20, issue 2, No 12, 453-474

Abstract: Abstract Advances in information technologies and e-commerce enable e-business firms to collect detailed consumers’ data and send Internet-based targeted advertising to their potential consumers accurately, thereby performing B2C sales. However, the perfect targeting for an e-business firm is always a challenge due to the asymmetric information between the firm and consumers. This essay starts by setting up a model with two horizontally differentiated firms competing in prices and targeted advertising at a variable targeting precision in an initially uninformed heterogeneous consumers market. The results indicate that both e-business firms should target only their advantage markets with optimal targeting precision. Otherwise, each e-business firm’s equilibrium profit might be lower or higher with Internet-based targeted advertising comparing to mass advertising, which depends on the effective choice of distinct targeting precision. Finally, the effective investment on the optimal targeting precision for e-business firms pursuing the maximum profit in the B2C sales model is generated.

Keywords: Internet-based targeted advertising; Mass advertising; Targeting precision; Advantage market; Weak market (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10660-019-09388-x

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