Advertising for Attention in a Consumer Search Model

43 Pages Posted: 18 May 2009

See all articles by Marco A. Haan

Marco A. Haan

University of Groningen

José L. Moraga-González

VU University Amsterdam; University of Groningen

Date Written: May 1, 2009

Abstract

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.

Keywords: Advertising, attention, consumer search, saliency

JEL Classification: D83, L13, M37

Suggested Citation

Haan, Marco A. and Moraga-Gonzalez, Jose Luis, Advertising for Attention in a Consumer Search Model (May 1, 2009). IESE Business School Working Paper No. 794, Available at SSRN: https://ssrn.com/abstract=1406342 or http://dx.doi.org/10.2139/ssrn.1406342

Marco A. Haan

University of Groningen ( email )

P.O. Box 800
9700 AV Groningen
Netherlands
+31 50 363 7327 (Phone)
+31 50 363 7227 (Fax)

Jose Luis Moraga-Gonzalez (Contact Author)

VU University Amsterdam ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands

HOME PAGE: http://www.tinbergen.nl/~moraga/

University of Groningen

P.O. Box 800
9700 AV Groningen, Groningen 9700 AV
Netherlands

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