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| Author: | Haan, M.A. Moraga-González, J.L. |
| Title: | Advertising for attention in a consumer search model |
| Journal: | Economic Journal
2011 : MAY, VOL 121:552 p. 552-579 |
| Index terms: | products marketing profit welfare search costs models advertising consumer behaviour |
| Language: | eng |
| Abstract: | This article models the idea that when consumers look for products, they first visit the company whose advertising is most salient. The gains a company gets from being visited early increase in search costs, so equilibrium advertising increases as search costs pick up. Consequently, higher search costs may decrease both consumer welfare and firm profits. The basic model is expanded by taking account for firm heterogeneity in advertising costs. Companies that raise attention more easily advertise more but also charge lower prices and obtain higher profits. As advertising costs asymmetries pick up, consumer surplus falls and aggregate profits increase. |
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