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Targeted advertising with consumer search: an economic analysis of keywords advertising

Author

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  • Alexandre de Cornière

    (PJSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

This article investigates the role of a search engine as an intermediary between firms and consumers. Search engines enable firms to target consumers who have revealed some specific needs through their query. In a framework with horizontal product differentiation, imperfect product information and in which consumers incur search costs, I show that introducing a "neutral" targeted advertising mechanism reduces social inefficiencies and tends to reduce the equilibrium price. Moreover, the accuracy of the mechanism has a non monotonic effect on the price of the good: the price is lowest when the accuracy is intermediate.

Suggested Citation

  • Alexandre de Cornière, 2009. "Targeted advertising with consumer search: an economic analysis of keywords advertising," Working Papers halshs-00575074, HAL.
    • Handle: RePEc:hal:wpaper:halshs-00575074
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00575074
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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