Distinct role of targeting precision of Internet-based targeted advertising in duopolistic e-business firms’ heterogeneous consumers market
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Advances in information technologies and e-commerce enable e-business firms to collect detailed consumers’ data and send Internet-based targeted advertising to their potential consumers accurately, thereby performing B2C sales. However, the perfect targeting for an e-business firm is always a challenge due to the asymmetric information between the firm and consumers. This essay starts by setting up a model with two horizontally differentiated firms competing in prices and targeted advertising at a variable targeting precision in an initially uninformed heterogeneous consumers market. The results indicate that both e-business firms should target only their advantage markets with optimal targeting precision. Otherwise, each e-business firm’s equilibrium profit might be lower or higher with Internet-based targeted advertising comparing to mass advertising, which depends on the effective choice of distinct targeting precision. Finally, the effective investment on the optimal targeting precision for e-business firms pursuing the maximum profit in the B2C sales model is generated.
KeywordsInternet-based targeted advertising Mass advertising Targeting precision Advantage market Weak market
Financial support provided by Zhejiang Provincial Natural Science Foundation of China (No. LY18G020015), China Postdoctoral Science Foundation Funded Project (No. 2017M621371), The Ministry of education of Humanities and Social Science project (19YJC630225) and National Natural Foundation of China (71673238) are gratefully acknowledged. The authors thank Dr. Leng Xue-fei, associate professor Gao Xin, and three reviewers for their valuable comments and suggestions, from which the paper benefited greatly.
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