STRATEGIC ADVERTISING AND DIRECTED SEARCH |
| |
| Authors: | Pedro Gomis‐Porqueras Benoit Julien Chengsi Wang |
| |
| Institution: | 1. Deakin University, Australia;2. UNSW Australia, Australia;3. University of Mannheim, Germany, and Monash University, AustraliaWe would like to thank the editor and the two anonymous referees for their insightful comments and suggestions. We also thank Chris Bidner, Inga Deimen, Jan Eeckhout, Pieter Gautier, Thanasis Geromichalos, John Kennes, Philip Kircher, Stephan Lauermann, Andy Mclennan, George Mailath, Roger Myerson, Andras Niedermayer, Mike Peters, Guillaume Roger, Nicolas Schutz, Sandro Shelegia, Ron Stauber, Peter Vida, Liang Wang, John Wooders, Charles Zheng, and seminar participants at Australian National University, University of New South Wales, University of Essex, University of Hawaii, University of Queensland, University of Technology Sydney, University of Western Ontario, and ESAM 2011 (Adelaide), EARIE 2012 (Rome), SAET 2012 (Brisbane), Summer Workshop on Money, Banking, Payments and Finance 2012 (Chicago), SFB/TR15 internal meeting 2013 (Bonn), and EEA 2015 (Mannheim) for helpful input. Chengsi Wang gratefully acknowledges research funding from MaCCI and Deutsche Forschungsgemeinschaft through SFB‐TR 15. The usual disclaimer applies. |
| |
| Abstract: | Imperfect observability and costly informative advertising are introduced into a standard directed search framework. Capacity‐constrained sellers send costly advertisements to direct buyers' uncoordinated search by specifying their location and terms of trade. We show that the equilibrium advertising intensity is nonmonotonic in the buyer–seller ratio. In addition, we also find that price posting dominates auctions since both mechanisms yield the same expected revenue, but the latter results in higher advertising expense. Finally, we find a positive comovement between market transparency and price for low market tightness when the measure of informed buyers is endogenous. |
| |
| Keywords: | |
|
|
