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Targeted information and limited attention


Hefti, Andreas; Liu, Shuo (2016). Targeted information and limited attention. Working paper series / Department of Economics 230, University of Zurich.

Abstract

We study targeted information in a duopoly model with differentiated products, allowing for consumers with limited attention. The presence of inattentive consumers incentivizes firms to behave as if they were mass-advertisers, despite their ability to direct their mes- sages precisely towards consumers with the strongest preferences. We show that the scope for targeting as an efficient marketing instrument can be severely reduced, for both firms and consumers, if the standard assumption of unbounded attention capacities is dropped. A central insight of our model is that limited attention may explain the recent evidence on increased ad-blocking, which has become a key concern to the entire advertising in- dustry. Our main findings are robust to several variations, including price and salience competition as well as varying quality of the available marketing data.

We study targeted information in a duopoly model with differentiated products, allowing for consumers with limited attention. The presence of inattentive consumers incentivizes firms to behave as if they were mass-advertisers, despite their ability to direct their mes- sages precisely towards consumers with the strongest preferences. We show that the scope for targeting as an efficient marketing instrument can be severely reduced, for both firms and consumers, if the standard assumption of unbounded attention capacities is dropped. A central insight of our model is that limited attention may explain the recent evidence on increased ad-blocking, which has become a key concern to the entire advertising in- dustry. Our main findings are robust to several variations, including price and salience competition as well as varying quality of the available marketing data.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:D43, L13, M37
Uncontrolled Keywords:Targeting, limited attention, advertising avoidance, salience competition
Language:English
Date:August 2016
Deposited On:12 Jul 2016 10:50
Last Modified:12 Jul 2016 10:50
Series Name:Working paper series / Department of Economics
Number of Pages:42
ISSN:1664-7041
Official URL:http://www.econ.uzh.ch/static/wp/econwp230.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers.php
Permanent URL: https://doi.org/10.5167/uzh-124916

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