Munich Personal RePEc Archive

Informative Advertising in Directed Search

Gomis-Porqueras, Pedro and Julien, Benoit and Chengsi, Wang (2012): Informative Advertising in Directed Search.

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Abstract

We consider a directed search environment where capacity constrained sellers reach uncoordinated buyers through costly advertising while buyers observed all prices probabilistically. We show that: (i) the equilibrium advertising intensity has an inverted U-shape in market tightness, (ii) the equilibrium advertising intensity is higher under an auction mechanism than under posted pricing, and (iii) the equilibrium price and measure of informed buyers may {be positively correlated} even in large markets.

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