Advertising Intensity and Welfare in an Equilibrium Search Model

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Date

2008-01-24

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Center for Applied Economics and Policy Research

Abstract

We analyze an equilibrium search model in a duopoly setting with bilateral heterogeneities in production and search costs in which firms can advertise by announcing price and location. We study existence, stability, and comparative statics in such a setting, compare the market advertising level to the socially optimal level, and find conditions in which firms advertise more or less than the social optimum.

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CAEPR, Center for Applied Economics and Policy Research, Advertising, Consumer Search, Search, Welfare

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Working Paper