Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Friday, April 22, 2011

Targeted advertising with consumer search: an economic analysis of keywords advertising

Posted by D. Daniel Sokol

Alexandre De Cornière (PSE - Paris-Jourdan Sciences Economiques) analyzes Targeted advertising with consumer search: an economic analysis of keywords advertising.

ABSTRACT: This article investigates the role of a search engine as an intermediary between firms and consumers. Search engines enable firms to target consumers who have revealed some specific needs through their query. In a framework with horizontal product differentiation, imperfect product information and in which consumers incur search costs, I show that introducing a "neutral" targeted advertising mechanism reduces social inefficiencies and tends to reduce the equilibrium price. Moreover, the accuracy of the mechanism has a non monotonic effect on the price of the good: the price is lowest when the accuracy is intermediate.

http://lawprofessors.typepad.com/antitrustprof_blog/2011/04/targeted-advertising-with-consumer-search-an-economic-analysis-of-keywords-advertising.html

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