Informative Advertising in Directed Search

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

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: costly advertising, directed search, imperfect observability, sales mechanism
• Subjects: M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M3 - Marketing and Advertising > M37 - Advertising; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J64 - Unemployment: Models, Duration, Incidence, and Job Search; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search ; Learning ; Information and Knowledge ; Communication ; Belief ; Unawareness

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