Sparking curiosity or tipping the scales? Targeted advertising with consumer learning

Andrei Matveenko and Egor Starkov

Journal of Economic Behavior & Organization, 2023, vol. 213, issue C, 172-192

Abstract: This paper argues, in the context of targeted advertising, that receivers’ ability to independently acquire information has a non-trivial impact on the sender’s optimal disclosure strategy. In our model, a monopolist has an opportunity to launch an advertising campaign and chooses a targeting strategy – which consumers to send its advertisement to. The consumers are uncertain about and heterogeneous in their valuations of the product, and can engage in costly learning about their true valuations. We discover that the firm generally prefers to target consumers who are either indifferent between ignoring and investigating the product, or between investigating and buying it unconditionally. If the firm is uncertain about the consumer appeal of its product, it targets these two distinct groups of consumers simultaneously but may ignore all consumers in between.

Keywords: Advertising; Targeting; Rational inattention; Costly disclosure (search for similar items in EconPapers)
JEL-codes: D83 L15 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 (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:213:y:2023:i:c:p:172-192

DOI: 10.1016/j.jebo.2023.07.008

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