Competitive Target Advertising and Consumer Data Sharing

Journal of Management Information Systems, Forthcoming

41 Pages Posted: 20 Oct 2012 Last revised: 15 Sep 2013

See all articles by Xia Zhao

Xia Zhao

University of North Carolina at Greensboro - Information Systems & Supply Chain Management

Ling Xue

Georgia State University

Date Written: June 19, 2012

Abstract

Advances in information technologies enable firms to collect detailed consumer data and target individual consumers with tailored ads. Consumer data is among the most valuable assets that firms own. An interesting phenomenon is that competing firms often trade their consumer data with each other. Based on a common-value all-pay auction framework, this paper studies the advertising competition between two firms which target the same consumer but are asymmetrically informed about the consumer value. We characterize firms' equilibrium competition strategies. The results show that better consumer information does not help the better informed firm save the advertising expenditure but enables it to reap a higher expected profit in competition. Sharing individual-level consumer data may soften the competition even though firms compete head-to-head for the same consumer. We also find that the better informed firm may sell its data to its competitor, but never voluntarily shares it with its competitor.

Keywords: Target marketing, advertising, information asymmetry, information sharing, common-value auction, all-pay auction

Suggested Citation

Zhao, Xia and Xue, Ling, Competitive Target Advertising and Consumer Data Sharing (June 19, 2012). Journal of Management Information Systems, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2164448

Xia Zhao (Contact Author)

University of North Carolina at Greensboro - Information Systems & Supply Chain Management ( email )

401 Bryan Building
Greensboro, NC 27402-6179
United States

Ling Xue

Georgia State University ( email )

35 Broad Street
Atlanta, GA 30303-3083
United States

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