January 2016
Beginner
562 pages
21h 17m
English
Content preview from Handbook of Media Economics, vol 1A
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firm advertises a lot to its local customers (it actually chooses to reach all of them), it does
not advertise to the others who are certain to receive a competing ad. Prices are then
larger than if targeted advertising was infeasible. In contrast, for large advertising
costs, each firm advertises to both consumer segments but selects advertising intensities
below 1. Prices are then lower than they would be without targeted ads.
In this setting, if a firm drops its price, the set of consumers it wishes to target with a
higher advertising intensity is expanded. The jump in advertising intensity for the mar-
ginal consumers (those who would switch to the firm who has cut its price if perfectly
informed) contributes to make demand more price elastic. ...
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