A model of endogenous targeting in duopoly

Christian Siemering

Information Economics and Policy, 2023, vol. 64, issue C

Abstract: The paper investigates welfare effects of targeted advertising in a duopoly. To this end, a game-theoretical model is proposed in which firms can make costly investments in their targeting technology. It can be shown that ex ante identical firms use different technologies in every pure-strategy equilibrium of the technology game. If firms target the same group of consumers, the low-technology firm could increase overall welfare by using a better technology. However, this leads to lower industry profits due to tougher competition among firms.

Keywords: Targeted advertising; Technology investments; Excessive targeting; Welfare (search for similar items in EconPapers)
JEL-codes: D43 L13 M37 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:iepoli:v:64:y:2023:i:c:s016762452300032x

DOI: 10.1016/j.infoecopol.2023.101047

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