Publication: You will: a macroeconomic analysis of digital advertising
Program
KU-Authors
KU Authors
Co-Authors
Greenwood, Jeremy
Ma, Yueyuan
Advisor
Publication Date
2024
Language
en
Type
Journal article
Journal Title
Journal ISSN
Volume Title
Abstract
An information-based model is developed where traditional and digital advertising finance the provision of free media goods and affect price competition. Digital advertising is directed toward specific consumers while traditional advertising is undirected. The equilibrium is suboptimal. Media goods, if valued by the consumer, are under provided with both types of advertising. Additionally, traditional advertising is excessive because it is undirected. The tax-cum-subsidy policy that overcomes these inefficiencies is characterized. The model is calibrated to the U.S. economy. Through the lens of the calibrated model, digital advertising increases welfare significantly. The welfare gain from the optimal policy is much smaller than the gain from digital advertising.
Description
Source:
Review of Economic Studies
Publisher:
Oxford University Press
Keywords:
Subject
Economics