Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86881
Authors: 
Haan, Marco A.
Moraga-Gonzalez, Jose Luis
Year of Publication: 
2009
Series/Report no.: 
Tinbergen Institute Discussion Paper 09-031/1
Abstract: 
We model the idea that when consumers search for products, they first visit the firm whose advertising is more salient. The gains a firm derives from being visited early increase in search costs, so equilibrium advertising increases as search costs rise. This may result in lower firm profits when search costs increase. We extend the basic model by allowing for firm heterogeneity in advertising costs. Firms whose advertising is more salient and therefore raise attention more easily charge lower prices in equilibrium and obtain higher profits. As advertising cost asymmetries increase, aggregate profits increase, advertising falls and welfare increases.
Subjects: 
Advertising
attention
consumer search
saliency
JEL: 
D83
L13
M37
Document Type: 
Working Paper

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