Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86011
Authors: 
Galeotti, Andrea
Moraga, Jose Luis
Year of Publication: 
2003
Series/Report no.: 
Tinbergen Institute Discussion Paper 03-035/1
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.
Subjects: 
Targeted advertising
oligopoly
price dispersion
segmented markets.
JEL: 
D43
D83
Document Type: 
Working Paper

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