Purchase-Based Targeted Advertising

2015 ◽  
pp. 171-188
Author(s):  
Jianqiang Zhang ◽  
Weijun Zhong ◽  
Shue Mei
Keyword(s):  
Social Welfare ◽  
Consumer Surplus ◽  
Information Gathering ◽  
Consumer Information ◽  
Competitive Effect ◽  
Competitive Effects ◽  
Targeted Advertising ◽  
Competitive Environments ◽  
Duopoly Model

Purchase-Based Targeted Advertising (PBTA) refers to the advertising that is targeted to an individual based on his or her purchase histories, which is ubiquitous in the age of e-commerce. This chapter examines the competitive effects of PBTA by establishing a two-period duopoly model: the first period consists of the consumer information gathering process while the second is the period where PBTA is embraced. Based on this model, it is found that PBTA may improve or damage industry profits, consumer surplus, as well as social welfare. The conditions under which the competitive effect is positive or negative are derived, showing that whether PBTA is beneficial or detrimental depends on the content of advertising designed by the competing firms. It is suggested that firms under competitive environments cautiously deploy PBTA with appropriate advertising contents.

Competitive Effects of Purchase-Based Targeted Advertising

2012 ◽  
Vol 10 (4) ◽  
pp. 71-84
Author(s):  
Jianqiang Zhang ◽  
Weijun Zhong ◽  
Shue Mei
Keyword(s):  
Social Welfare ◽  
Product Differentiation ◽  
Price Competition ◽  
Consumer Surplus ◽  
Consumer Information ◽  
Competitive Effects ◽  
Targeted Advertising ◽  
Consumer Valuation ◽  
Competitive Environments ◽  
Second Period

This paper develops a two-period sales model to investigate the competitive effects of purchase-based targeted advertising. In the model, two competing firms gain consumer information during the first period sales, which allows them to target advertising based on consumer purchase history. Advertising is assumed to be persuasive in terms of consumer valuation enhancing and product differentiation increasing. The authors find that the firm’s ability to target can damage industry profits, consumer surplus, and even social welfare. The conditions under which targeted advertising is positive or negative are derived, showing that price competition is softened in the second period but intensified in the first. It is suggested that firms under competitive environments cautiously sponsor targeted advertising with appropriate contents.

scholarly journals Shared Manufacturing in A Differentiated Duopoly with Capacity Constraints

2022 ◽  
Author(s):  
Junlong Chen ◽  
Chaoqun Sun ◽  
Jiali Liu
Keyword(s):  
Social Welfare ◽  
Market Share ◽  
Product Differentiation ◽  
Consumer Surplus ◽  
Cournot Competition ◽  
Capacity Constraints ◽  
Excess Capacity ◽  
Stackelberg Competition ◽  
Duopoly Model ◽  
Negative Role

Abstract This study sets up a differentiated duopoly model considering capacity constraints and shared manufacturing, investigates the equilibrium results, examines the effects of product differentiation and capacity constraints in three scenarios, and compares the equilibrium outcomes in three cases under Cournot and Stackelberg competition. We find that capacity constraints affect the relationships among product differentiation, equilibrium results, and the market share of enterprises. Shared manufacturing impacts the degree of excess capacity, profits, consumer surplus, and social welfare; however, it may sometimes play a negative role in alleviating excess capacity. Moreover, Cournot competition is a better choice for enterprises with capacity constraints compared to Stackelberg competition.

scholarly journals Competitive Personalized Pricing

2020 ◽  
Vol 66 (9) ◽  
pp. 4003-4023 ◽  
Author(s):  
Zhijun Chen ◽  
Chongwoo Choe ◽  
Noriaki Matsushima
Keyword(s):  
Social Welfare ◽  
Price Discrimination ◽  
Identity Management ◽  
Consumer Surplus ◽  
Consumer Information ◽  
Deadweight Loss ◽  
Market Segment ◽  
Target Segment ◽  
Price Discriminate

We study a model where each competing firm has a target segment where it has full consumer information and can exercise personalized pricing, and consumers may engage in identity management to bypass the firm’s attempt to price discriminate. In the absence of identity management, more consumer information intensifies competition because firms can effectively defend their turf through targeted personalized offers, thereby setting low public prices offered to nontargeted consumers. But the effect is mitigated when consumers are active in identity management because it raises the firm’s cost of serving nontargeted consumers. When firms have sufficiently large and nonoverlapping target segments, identity management can enable firms to extract full surplus from their targeted consumers through perfect price discrimination. Identity management can also induce firms not to serve consumers who are not targeted by either firm when the commonly nontargeted market segment is small. This results in a deadweight loss. Thus, identity management by consumers can benefit firms and lead to lower consumer surplus and lower social welfare. Our main insight continues to be valid when a fraction of consumers are active in identity management or when there is a cost of identity management. We also discuss the regulatory implications for the use of consumer information by firms as well as the implications for management. This paper was accepted by Juanjuan Zhang, marketing.

DECISION MAKING ON STRATEGIC ENVIRONMENTAL TECHNOLOGY LICENSING: FIXED-FEE VERSUS ROYALTY LICENSING METHODS

2009 ◽  
Vol 08 (03) ◽  
pp. 609-624 ◽  
Author(s):  
MING-CHUNG CHANG ◽  
JIN-LI HU ◽  
GWO-HSHIUNG TZENG
Keyword(s):  
Social Welfare ◽  
Consumer Surplus ◽  
Technology Licensing ◽  
Environmental Damage ◽  
Environmental Technology ◽  
Tax Rate ◽  
Duopoly Model ◽  
High Emission ◽  
Fixed Fee

Because of a deterioration in the quality of the environment, this paper studies the effects of the environment and the economy on environmental technology licensing in a homogeneous Cournot duopoly model in order to reduce environmental pollution and hence improve social welfare. To this end, two licensing methods — namely, a fixed-fee licensing method and a royalty licensing method — are compared. It is found that a high emission tax rate induces the innovator to not license the environmental technology to the licensee under the fixed-fee licensing method. As for social welfare, a large innovation scale of environmental technology does not guarantee that social welfare will be maximized. Finally, a large innovation scale of environmental technology is likely to increase consumer surplus if the marginal environmental damage is significant. Consumers are likely to prefer royalty licensing to fixed-fee licensing. This conclusion differs from Wang's finding in 2002.

scholarly journals Externalities and Regulation in Card Payment Systems

2006 ◽  
Vol 5 (1) ◽  
Author(s):  
Jean-Charles Rochet ◽  
Jean Tirole
Keyword(s):  
Social Welfare ◽  
Consumer Surplus ◽  
Welfare Analysis ◽  
Payment Systems ◽  
Interchange Fees ◽  
Regulatory Approach ◽  
Innovative Thinking ◽  
Card Payment ◽  
Economic Thinking

The paper offers a roadmap to the current economic thinking concerning interchange fees. After describing the fundamental externalities inherent in payment systems and analysing merchant resistance to interchange fee increases and the associations' determination of this fee, it derives the externalities' implications for welfare analysis. It then discusses whether consumer surplus or social welfare is the proper benchmark for regulatory purposes. Finally, it offers a critique of the current regulatory approach, and concludes with a call for more novel and innovative thinking about how to reconcile regulators' concerns and the industry legitimate desire to perform its balancing act.

Endogenous Timing in Vertically-Related Markets

2018 ◽  
Vol 18 (2) ◽  
Author(s):  
Hong-Ren Din ◽  
Chia-Hung Sun
Keyword(s):  
Social Welfare ◽  
Price Competition ◽  
Consumer Surplus ◽  
The Other ◽  
Endogenous Timing ◽  
Price Strategy ◽  
Quantity Competition ◽  
Sequential Game ◽  
Product Substitutability

Abstract This paper investigates the theory of endogenous timing by taking into account a vertically-related market where an integrated firm competes with a downstream firm. Contrary to the standard results in the literature, we find that both firms play a sequential game in quantity competition and play a simultaneous game in price competition. Under mixed quantity-price competition, the firm choosing a price strategy moves first and the other firm choosing a quantity strategy moves later in equilibrium. Given that the timing of choosing actions is determined endogenously, aggregate profit (consumer surplus) is higher (lower) under price competition than under quantity competition. Lastly, social welfare is higher under quantity competition than under price competition when the degree of product substitutability is relatively low.

A Model of Queue Scalping

2021 ◽  
Author(s):  
Luyi Yang ◽  
Zhongbin Wang ◽  
Shiliang Cui
Keyword(s):  
Social Welfare ◽  
Service Provider ◽  
Operations Management ◽  
Consumer Surplus ◽  
System Throughput ◽  
Theoretic Model ◽  
Material Interest ◽  
Long Run ◽  
Short Run ◽  
Primary Service

Recent years have witnessed the rise of queue scalping in congestion-prone service systems. A queue scalper has no material interest in the primary service but proactively enters the queue in hopes of selling his spot later. This paper develops a queueing-game-theoretic model of queue scalping and generates the following insights. First, we find that queues with either a very small or very large demand volume may be immune to scalping, whereas queues with a nonextreme demand volume may attract the most scalpers. Second, in the short run, when capacity is fixed, the presence of queue scalping often increases social welfare and can increase or reduce system throughput, but it tends to reduce consumer surplus. Third, in the long run, the presence of queue scalping motivates a welfare-maximizing service provider to adjust capacity using a “pull-to-center” rule, increasing (respectively, reducing) capacity if the original capacity level is low (respectively, high). When the service provider responds by expanding capacity, the presence of queue scalping can increase social welfare, system throughput, and even consumer surplus in the long run, reversing its short-run detrimental effect on customers. Despite these potential benefits, such capacity expansion does little to mitigate scalping and may only generate more scalpers in the queue. Finally, we compare and contrast queue scalping with other common mechanisms in practice—namely, (centralized) pay-for-priority, line sitting, and callbacks. This paper was accepted by Victor Martínez de Albéniz, operations management.

STORE PROMOTION, MANUFACTURER COMPETITION AND WELFARE

2021 ◽  
pp. 1-18
Author(s):  
HAO WANG ◽  
XUNDONG YIN ◽  
ALICE Y. OUYANG
Keyword(s):  
Social Welfare ◽  
Consumer Preferences ◽  
Consumer Surplus ◽  
Weighted Average ◽  
Brand Name ◽  
Price Distortion ◽  
Online Platforms ◽  
Brand Competition ◽  
The Social ◽  
Partial Exclusion

This study evaluates the partial exclusion effects of store promotion. We find that a manufacturer with a better brand name has a higher willingness-to-pay for promotion services offered by retail stores or online platforms. The promotion results in higher sales-weighted average prices (wholesale and retail) and a larger inter-brand price gap. The stores or platforms extract more profits from manufacturers and consumers through the promotion services. The effects on consumer surplus and social welfare depend on whether the promotion alters consumer preferences. If it does, more consumers would be choosing their less-preferred brands because of the larger inter-brand price gap, which would be socially inefficient. If it does not, the promotion may help to correct the price distortion, but the social welfare effect is positive only when the promotion effect is small enough. In both cases, the promotion services reduce the total consumer surplus by softening inter-brand competition.

Bidirectional Role of Accuracy and Recognition in Internet-Based Targeted Advertising

2017 ◽  
pp. 1202-1221
Author(s):  
Jiang Zhao ◽  
Shu-e Mei ◽  
Wei-jun Zhong
Keyword(s):  
Social Welfare ◽  
Equilibrium Price ◽  
Correct Prediction ◽  
Theoretic Model ◽  
Positive Role ◽  
Targeted Advertising ◽  
Potential Consumer ◽  
Consumer Segment ◽  
Negative Role

The effective media strategy in advertising is gradually becoming the premise of company that lives in the competition of marketing. Due to the rapid growth of new advertising media and technologies, it is possible for a firm to precisely target advertising to the potential consumer segment within a market. This research explores the extent to which an advertiser should regulate the quality of its targeting and effect on consumers' surplus and social welfare. The authors present a theoretic model measuring the targeting quality of internet-based targeted advertising with two measures termed accuracy and recognition. Accuracy measures the possibility of correct prediction in the target segment, while recognition is defined as the probability that any member of the targeted segment is identified. The authors demonstrate, within a monopolistic framework, the online targeted advertising might lower or increase both consumers' surplus and social welfare compared with mass advertising, which depends on different range of accuracy and recognition in the social media. The recognition of internet-based targeted advertising plays a positive role on equilibrium price, whereas the accuracy plays a negative role in the regulation of advertising intensity and equilibrium price. Therefore, it is believed that the accuracy and recognition of the online targeted advertising can be used as a lever for the strategic segmentation of a market.

Bidirectional Role of Accuracy and Recognition in Internet-Based Targeted Advertising

2015 ◽  
Vol 13 (1) ◽  
pp. 50-66
Author(s):  
Jiang Zhao ◽  
Shu-e Mei ◽  
Wei-jun Zhong
Keyword(s):  
Social Welfare ◽  
Equilibrium Price ◽  
Correct Prediction ◽  
Theoretic Model ◽  
Positive Role ◽  
Advertising Intensity ◽  
Targeted Advertising ◽  
Consumer Segment ◽  
Negative Role

The effective media strategy in advertising is gradually becoming the premise of company that lives in the competition of marketing. Due to the rapid growth of new advertising media and technologies, it is possible for a firm to precisely target advertising to the potential consumer segment within a market. This research explores the extent to which an advertiser should regulate the quality of its targeting and effect on consumers' surplus and social welfare. The authors present a theoretic model measuring the targeting quality of internet-based targeted advertising with two measures termed accuracy and recognition. Accuracy measures the possibility of correct prediction in the target segment, while recognition is defined as the probability that any member of the targeted segment is identified. The authors demonstrate, within a monopolistic framework, the online targeted advertising might lower or increase both consumers' surplus and social welfare compared with mass advertising, which depends on different range of accuracy and recognition in the social media. The recognition of internet-based targeted advertising plays a positive role on equilibrium price, whereas the accuracy plays a negative role in the regulation of advertising intensity and equilibrium price. Therefore, it is believed that the accuracy and recognition of the online targeted advertising can be used as a lever for the strategic segmentation of a market.

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