Flexible Demand Manipulation
Theoretical Economics
2025-06-04 v2 Computer Science and Game Theory
Abstract
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.
Keywords
Cite
@article{arxiv.2410.24191,
title = {Flexible Demand Manipulation},
author = {Yifan Dai and Andrew Koh},
journal= {arXiv preprint arXiv:2410.24191},
year = {2025}
}