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Flexible Demand Manipulation

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arxiv 2410.24191 v2 pith:V23CGY4D submitted 2024-10-31 econ.TH cs.GT

classification econ.THcs.GT
keywords advertisingdemandcurvemanipulationwelfareanalyzebenefitcharacterize
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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.

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Cited by 1 Pith paper

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  1. An Economy of AI Agents

    econ.GN 2025-09 accept novelty 2.0 of 10

    A survey chapter that maps open economic questions about AI agents in markets, organizations, and institutions, arguing that current theories may need extension.

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