The Role of Targeted Advertising with Vertical Differentiation on Direct Sales Channel Versus Distribution Channel

摘要

Within vertical differentiation model, the role of targeted advertising on direct sales channel and distribution channel are studied. Compared to mass advertising, the firm using targeted advertising in distinct channels can benefit the firm's equilibrium profit by reducing the waste of advertising and enhancing the price of product. The manufacturer might use the targeted advertising to control the total profit of the channel. Meanwhile, the targeted advertising might reduce the retailer's profit as well as the total channel profit.