De-targeting: advertising an assortment of products to loss-averse consumers

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URL:	https://ub-madoc.bib.uni-mannheim.de/40215
URN:	urn:nbn:de:bsz:180-madoc-402154
Dokumenttyp:	Arbeitspapier
Erscheinungsjahr:	2016
Titel einer Zeitschrift oder einer Reihe:	Working Paper Series
Band/Volume:	16-03
Ort der Veröffentlichung:	Mannheim
Sprache der Veröffentlichung:	Englisch
Einrichtung:	Fakultät für Rechtswissenschaft und Volkswirtschaftslehre > Industrieökonomik, Wettbewerbspolitik u. Regulierung (Peitz 2007-)
MADOC-Schriftenreihe:	Department of Economics > Working Paper Series
Fachgebiet:	330 Wirtschaft
Fachklassifikation:	JEL: L13 , D43 , M3,
Freie Schlagwörter (Englisch):	Targeted advertising , Informative advertising , Consumer loss aversion , Reference prices , Contextual inference , Consumer recognition , Behavioral industrial organization
Abstract:	We consider product markets in which consumers are interested only in a specific product category and initially do not know which product category matches their tastes. Using sophisticated tracking technologies, an intermediary can make inferences about a consumer’s preferred product category and offer advertising firms the possibility to target their ads to match the consumer’s taste. Such targeting reduces overall advertising costs and, as a direct effect, increases industry profits. However, as we show in this paper, when consumers form reference prices and are loss averse, more precise targeting may intensify competition between firms. As a result, firms may earn higher profits from “de-targeted” advertising; i.e., when the intermediary deliberately informs about some products and their price quotes from outside a consumer’s preferred product category.