There have been some great blog posts this week! Since we've been discussing advertising in class, I'd like you to read and discuss Shimon's post (and the article linked therein) about Google advertising in online games. In particular: can you write down a model which examines the welfare effects of developing technology that allows much more targeted advertising?
One place to start would be to assume that there are equal numbers of two kinds of consumers, aggressive and passive, and two kinds of goods, X and Y. Assume that aggressive consumers prefer X over Y, and the reverse is true of passive consumers. In the absence of Google's technology, ads would have to be delivered to both types of consumers, meaning that any given ad has only a 50% chance of reaching a customer. With Google's technology, ads can be delivered only to those who are likely to buy the product. Who benefits from this technology? What are the costs of it? How might privacy concerns be addressed within the parameters of the model?
(Hint: I might very well ask you to write down a "new" model like this on the final...it's a good idea to practice now, and present your model in section, or write it up as a comment or a new blog post.)
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