The Expansion of Product Varieties in the New Age of Advertising

Salome Baslandze, Jeremy Greenwood, Ricardo Marto and Sara Moreira ()
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Sara Moreira: Northwestern University, https://www.spmoreira.com/

No 37, Economie d'Avant Garde Research Reports from Economie d'Avant Garde

Abstract: The last decades have seen large improvements in advertising technology that allowed firms to target better specific consumers. The relationship between advertising, the rise of product varieties, and economic welfare is studied here. A model of advertising and product varieties is developed, where firms choose the intensity of digital ads directed at specific consumers as well traditional ads that are undirected. The calibrated model shows that improvements in digital advertising have driven the rise in product varieties over time. Causal empirical evidence, using detailed micro data on firms' products and advertising choices for the 1995-2015 period and exogenous variation in consumers' differential access to the internet, supports the suggested theoretical mechanism. In Review of Economic Dynamics, v. 50, October: 171-210.

Keywords: causality; digital (directed) advertising; lightening strikes; micro-level data; product lines; regression analysis; specialization; targeting; traditional (undirected) advertising; varieties (search for similar items in EconPapers)
JEL-codes: E13 I31 L15 M37 O14 O31 (search for similar items in EconPapers)
Date: 2023-03
New Economics Papers: this item is included in nep-ind and nep-pay
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Citations: View citations in EconPapers (4)

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