Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/76509
Authors: 
Galeotti, Andrea
Moraga-González, José Luis
Year of Publication: 
2004
Series/Report no.: 
CESifo Working Paper 1196
Abstract: 
We study a simultaneous move game of targeted advertising and pricing in a market with various consumer segments. In this setting we explore the implications of market segmentation on firm competitiveness. If firms are unable to target their ads on different consumer segments, a unique zero-profit equilibrium exists. By contrast, if firms employ targeted advertising, they can obtain positive profits. In equilibrium firms price very aggressively when they address the most profitable segment, quite gently when they target their ads on the least profitable segment and moderately aggressive when they advertise in the entire market.
Subjects: 
segmentation
targeted advertising
oligopoly
price dispersion
price discrimination
Document Type: 
Working Paper

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