Specialization in a Knowledge Economy

Ma, Yueyuan

doi:10.2139/ssrn.4052990

Cited by 2 publications

(2 citation statements)

References 42 publications

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“…In contrast to these models, which have single-product firms choosing a niche or generic design, here the number of different varieties offered by multi-product firms grows with targeting, consistent with the data. Last, Ma (2022) analyzes both theoretically and empirically how a reduction in search costs and better patent protection have resulted in more specialization in firms' production, while Shen (2023) shows how the declining cost of marketing since the 1990s contributed to increasing concentration and declining productivity growth.…”

Section: Introductionmentioning

confidence: 99%

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2023

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The last decades have seen large improvements in digital advertising technology that allowed firms to better target specific consumer tastes. This research studies the relationship among digital advertising, the rise of varieties, and economic welfare. We develop a model of advertising and varieties where firms choose the intensity of digital ads directed at specific consumers as well as traditional ads that are undirected. The calibrated model shows that improvements in digital advertising have driven the rise in varieties over time. Empirical evidence is presented using detailed micro data on firms' products and advertising choices for the 1995-2015 period. Causal analysis using exogenous variation in consumers' differential access to the internet supports the suggested mechanism.

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Section: Introductionmentioning

confidence: 99%