
doi: 10.2139/ssrn.2040983
We consider a directed search environment where capacity constrained sellers reach uncoordinated buyers through costly advertising while buyers observed all prices probabilistically. We show that: (i) the equilibrium advertising intensity has an inverted U-shape in market tightness, (ii) the equilibrium advertising intensity is higher under an auction mechanism than under posted pricing, and (iii) the equilibrium price and measure of informed buyers may {be positively correlated} even in large markets.
costly advertising, directed search, imperfect observability, sales mechanism, costly advertising, directed search, imperfect observability, sales mechanism., jel: jel:M37, jel: jel:D83, jel: jel:E52, jel: jel:E63, jel: jel:J64
costly advertising, directed search, imperfect observability, sales mechanism, costly advertising, directed search, imperfect observability, sales mechanism., jel: jel:M37, jel: jel:D83, jel: jel:E52, jel: jel:E63, jel: jel:J64
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