Limited attention, competition and welfare

• 成果类型: Article
• 署名作者: Hefti, Andreas
• 署名单位: Zurich University of Applied Sciences; University of Zurich
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2018.09.012
• 发表日期: 2018
• 页码: 318-359
• 关键词: attention; imperfect competition; bounded rationality; product differentiation; SALIENCE; Contest theory

摘要

This article presents a tractable framework that embeds the allocation of limited attention into competition theory. Motivated by evidence from psychology and marketing a setting is studied where firms can manipulate consumer attention and compete in prices among perceived alternatives. The introduction of limited attention changes the positive and normative predictions obtained from otherwise standard models, such as Salop-style competition. Further, the model identifies when limited attention is beneficial or harmful to firms, and explains why the individually rational decision to become less attentive in presence of more choice options may be catalyzed to a collective inattention trap over the market mechanism. (C) 2018 Elsevier Inc. All rights reserved.