Advertising Intensity and Welfare in an Equilibrium Search Model
31 Pages Posted: 31 Jan 2008 Last revised: 27 Apr 2016
Date Written: February 11, 2016
We analyze an equilibrium search model in a duopoly setting with bilateral heterogeneities in production and search costs in which firms can advertise by announcing price and location. We study existence, stability, and comparative statics in such a setting, compare the market advertising level to the socially optimal level, and find conditions in which firms advertise more or less than the social optimum.
Keywords: Search, Advertising, Welfare
JEL Classification: D21, D43, D83, M37
Suggested Citation: Suggested Citation