De-targeting: advertising an assortment of products to loss-averse consumers

Heiko Karle and Martin Peitz

No 16-03, Working Papers from University of Mannheim, Department of Economics

Abstract: We consider product markets in which consumers are interested only in a specific product category and initially do not know which product category matches their tastes. Using sophisticated tracking technologies, an intermediary can make inferences about a consumer’s preferred product category and offer advertising firms the possibility to target their ads to match the consumer’s taste. Such targeting reduces overall advertising costs and, as a direct effect, increases industry profits. However, as we show in this paper, when consumers form reference prices and are loss averse, more precise targeting may intensify competition between firms. As a result, firms may earn higher profits from “de-targeted” advertising; i.e., when the intermediary deliberately informs about some products and their price quotes from outside a consumer’s preferred product category.

Keywords: Targeted advertising; Informative advertising; Consumer loss aversion; Reference prices; Contextual inference; Consumer recognition; Behavioral industrial organization (search for similar items in EconPapers)
JEL-codes: D43 L13 M3 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-com and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://madoc.bib.uni-mannheim.de/40215/1/Karle%20und%20Peitz%2016-03.pdf

Related works:
Journal Article: De-targeting: Advertising an assortment of products to loss-averse consumers (2017)
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:mnh:wpaper:40215

Access Statistics for this paper

More papers in Working Papers from University of Mannheim, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Katharina Rautenberg ().