A two-period duopoly model is developed to examine the competitive effects of targeted advertising with customer recognition （TACR）. In the model, two competing firms sell goods to end consumers in the first period,...A two-period duopoly model is developed to examine the competitive effects of targeted advertising with customer recognition （TACR）. In the model, two competing firms sell goods to end consumers in the first period, during which customer recognition is obtained. In the second period, advertising can be targeted toward different consumer types. Advertising is assumed to be persuasive in the way that consumer valuation is increased. Equilibrium decisions and profits in each period are derived, showing that the firm who loses the current competition will win in the future. As a result, forward-looking firms price less aggressively so that their long-term profits can be enhanced with the help of TACR. Particularly, TACR improves profits through three important effects： valuation increasing, customer poaching, and anti-competition. Finally, this paper investigates the welfare issues, showing that firms enhance profits at the expense of consumer surplus. It is, therefore, suggested that public sectors take a step to protect consumers with the rapid development of targeting technology.展开更多
基金The National Natural Science Foundation of China(No.71071033)the Research and Innovation Project for College Graduates of Jiangsu Province(No.CXZZ-0186)
文摘A two-period duopoly model is developed to examine the competitive effects of targeted advertising with customer recognition （TACR）. In the model, two competing firms sell goods to end consumers in the first period, during which customer recognition is obtained. In the second period, advertising can be targeted toward different consumer types. Advertising is assumed to be persuasive in the way that consumer valuation is increased. Equilibrium decisions and profits in each period are derived, showing that the firm who loses the current competition will win in the future. As a result, forward-looking firms price less aggressively so that their long-term profits can be enhanced with the help of TACR. Particularly, TACR improves profits through three important effects： valuation increasing, customer poaching, and anti-competition. Finally, this paper investigates the welfare issues, showing that firms enhance profits at the expense of consumer surplus. It is, therefore, suggested that public sectors take a step to protect consumers with the rapid development of targeting technology.
