The expansion of varieties in the new age of advertising

Salome Baslandze*, Jeremy Greenwood, Ricardo Marto, Sara Moreira

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

The last decades have seen large improvements in digital advertising technology that allowed firms to target better specific consumer tastes. This research studies the relationship between digital advertising, the rise of varieties, and economic welfare. A model of advertising and varieties is developed, where firms choose the intensity of digital ads directed at specific consumers as well as traditional ads that are undirected. The calibrated model shows that improvements in digital advertising have driven the rise in varieties over time. Empirical evidence is presented using detailed micro data on firms' products and advertising choices since 1995. Causal analysis using exogenous variation in consumers' differential access to the internet supports the suggested mechanism.

Original languageEnglish (US)
Pages (from-to)171-210
Number of pages40
JournalReview of Economic Dynamics
Volume50
DOIs
StatePublished - Oct 2023

Keywords

  • Digital (directed) advertising
  • Internet
  • Specialization
  • Targeting
  • Traditional (undirected) advertising
  • Varieties

ASJC Scopus subject areas

  • Economics and Econometrics

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