The Price of Discovering Your Needs Online

Carroni, Elias ; Ferrari, Luca ; Righi, Simone (2018) The Price of Discovering Your Needs Online. Bologna: Dipartimento di Scienze economiche, p. 31. DOI 10.6092/unibo/amsacta/5761. In: Quaderni - Working Paper DSE (1116). ISSN 2282-6483.
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Abstract

Thanks to new digital technologies, web users are continuously targeted by offers that potentially fit their interests even if they are not actively looking for a product. Does this matching always promote transactions with high social value? We consider a model in which web users with state-contingent preferences are targeted by relevant banners. We characterize the optimal strategy of a seller who, in addition to the price of the offered good, designs a banner. We show that, in equilibrium, there is a positive relationship between the price of the offered good and the accuracy of the banner sent to users. Then, we consider the strategic decision of a Platform that attracts sellers because of its targeting abilities and we underline that a reduction in seller's costs may translate into less informative banners and lower prices, fueling purchases of goods that rational individuals may regret due to the persuasive nature of banners.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Carroni, EliasUniversità di Bologna0000-0002-6809-5339
Ferrari, LucaUniversity of Corsica
Righi, SimoneUniversità di Bologna0000-0001-9821-8451
Keywords
Bayesian Persuasion, Targeting, Platforms
Subjects
ISSN
2282-6483
DOI
Deposit date
16 Jan 2018 08:45
Last modified
15 Feb 2018 11:46
URI

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