December 9, 2020 | 2:45 pm
December 9, 2020 | 4:00 pm
Jeremy Greenwood from University of Pennsylvania will present "`You Will:' A Macroeconomic Analysis of Digital Advertising".
A model is developed where traditional and digital advertising finance the provision of free media goods and affect price competition. The economy is not efficient. Media goods are under provided. Additionally, there is too much advertising when ads cannot be perfectly directed toward potential buyers. The tax-cum-subsidy policy that overcomes these inefficiencies is characterized. The model is calibrated to the U.S. economy. The movement toward digital advertising increases consumer welfare significantly and is disproportionately financed by better-off consumers. The welfare gain from the optimal tax-cum-subsidy policy is much smaller than the one realized by the introduction of digital advertising. This is a report on research in progress.