EconPapers    
Economics at your fingertips  
 

De-targeting: Advertising an assortment of products to loss-averse consumers

Heiko Karle () and Martin Peitz

European Economic Review, 2017, vol. 95, issue C, 103-124

Abstract: We consider product markets in which single-product firms sell differentiated products to consumers through an intermediary. Consumers are interested only in a specific product category, but do not know before inspection which products belong to this category. An intermediary knows each consumer’s preferred product category and which products belong to it. It makes personalized product announcements to consumers. Such targeted advertising reduces overall advertising costs and, as a direct effect, maximizes industry profits. However, as we show in this paper, when consumers form reference prices and are loss averse, announcing additional products relaxes competition between firms. As a result, firms may earn higher profits from “de-targeting”; i.e., when the intermediary deliberately informs about some products and their price quotes from outside a consumer’s preferred product category.

Keywords: Targeted advertising; Informative advertising; Consumer loss aversion; Reference prices; Contextual inference; Behavioral industrial organization (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0014292117300582
Full text for ScienceDirect subscribers only

Related works:
Working Paper: De-targeting: advertising an assortment of products to loss-averse consumers (2016) Downloads
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:eee:eecrev:v:95:y:2017:i:c:p:103-124

Access Statistics for this article

European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

More articles in European Economic Review from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-03-07
Handle: RePEc:eee:eecrev:v:95:y:2017:i:c:p:103-124