Strategic Targeted Advertising

Andrea Galeotti and Jose Luis Moraga ()
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Jose Luis Moraga: Groningen University

No 03-035/1, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We present a strategic game of pricing and targeted-advertising. Firms cansimultaneously target priceadvertisements to different groups of customers, or to the entiremarket. Pure strategy equilibria do not exist and thus marketsegmentation cannot occur surely. Equilibria exhibit random advertising--to induce an unequal distribution of information in the market-- andrandom pricing --to obtain profits from badly informed buyers--. Wecharacterize a positive profits equilibrium where firms advertise lowprices to a segment of consumers, high prices to a distinct segment ofconsumers, and intermediate prices to the entire market. As a resultthe market is segmented only from time to time and presentssubstantial price dispersion across segments.

Keywords: Targeted advertising; oligopoly; price dispersion; segmented markets. (search for similar items in EconPapers)
JEL-codes: D43 D83 (search for similar items in EconPapers)
Date: 2003-05-11
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Citations: View citations in EconPapers (3)

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