2024/10/31 by Dai, Yifan, Koh, Andrew
#Computer Science and Game Theory (cs.GT) #FOS: Computer and information sciences #FOS: Economics and business #Theoretical Economics (econ.TH)
paper · doi:10.48550/arxiv.2410.24191
We develop a simple framework to analyze how targeted persuasive advertising shapes market power and welfare. A designer flexibly manipulates the demand curve by influencing individual valuations at a cost. A monopolist prices against this manipulated demand curve. We fully characterize the form of optimal advertising plans under ex-ante and ex-post welfare measures. Flexibility per se is powerful, and can substantially harm or benefit consumers vis-a-vis uniform advertising. We discuss implications for regulation, intermediation, and the joint design of manipulation and information.