European Business Schools Librarian's Group
IESE Research Papers,
IESE Business School
No D/794: Advertising for attention in a consumer search model
Marco A. Haan () and Jose L. Moraga-Gonzalez
Additional contact information
Marco A. Haan: University of Groningen, Postal: IESE Business School. Research Division, Av Pearson 21, 08034 Barcelona, SPAIN
Jose L. Moraga-Gonzalez: University of Groningen, Postal: IESE Business School. Research Division, Av Pearson 21, 08034 Barcelona, SPAIN
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
43 pages, May 3, 2009
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DI-0794-E.pdf
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