Flexible Demand Manipulation

Yifan Dai and Andrew Koh

Papers from arXiv.org

Abstract: We develop a simple framework to analyze how targeted persuasive advertising shapes market power and welfare. A designer flexibly manipulates the demand curve by influencing individual valuations at a cost. A monopolist prices against this manipulated demand curve. We fully characterize the form of optimal advertising plans under ex-ante and ex-post welfare measures. Flexibility per se is powerful, and can substantially harm or benefit consumers vis-a-vis uniform advertising. We discuss implications for regulation, intermediation, and the joint design of manipulation and information.

Date: 2024-10, Revised 2025-06
New Economics Papers: this item is included in nep-com, nep-mic and nep-reg
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