Advertising for Attention in a Consumer Search Model
Marco A. Haan
University of Groningen
José Luis Moraga-González
University of Navarra, IESE Business School; University of Groningen
May 1, 2009
IESE Business School Working Paper No. 794
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.
Number of Pages in PDF File: 43
Keywords: Advertising, attention, consumer search, saliency
JEL Classification: D83, L13, M37working papers series
Date posted: May 18, 2009
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