Optimal targeting with entry

Xingyi Liu

Managerial and Decision Economics, 2018, vol. 39, issue 3, 285-296

Abstract: We study an advertising agency's optimal choice of targeting technology with endogenous market structure, namely, when targeting changes firms' entry strategies into the advertising and product market. We show that the advertising agency faces a trade†off between demand†expansion and profit†dissipation: The former arises as targeting induces more entry and increases the demand for advertising; the latter refers to that targeting relaxes competition by inducing more differentiation. We show that perfect targeting is not optimal for the advertising agency. Compared to social optimum, the advertising agency underinvests in targeting when investment cost is low and overinvests when targeting is costly.

Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/mde.2903

Related works:
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:wly:mgtdec:v:39:y:2018:i:3:p:285-296

Access Statistics for this article

Managerial and Decision Economics is currently edited by Antony Dnes

More articles in Managerial and Decision Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().