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Limited Attention as a Scarce Resource in Information-Rich Economies

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  • Josef Falkinger

Abstract

This article uses basic facts from the psychology of attention to show how the limited attention of consumers affects economic competition. The article determines endogenously whether an economy is information rich or information poor. A conventional economic equilibrium results if subjects have spare attention capacity. At the positive level, the respective impacts of advances in information technology, international integration and the media on equilibrium diversity and level of attention-seeking activities are shown. At the normative level, the issues of welfare, efficiency and optimal policy interventions are addressed. Copyright � The Author(s). Journal compilation � Royal Economic Society 2008.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 118 (2008)
Issue (Month): 532 (October)
Pages: 1596-1620

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Handle: RePEc:ecj:econjl:v:118:y:2008:i:532:p:1596-1620

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References

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  1. Falkinger, Josef, 2007. "Attention economies," Journal of Economic Theory, Elsevier, vol. 133(1), pages 266-294, March.
  2. Arjo Klamer & Hendrik P. van Dalen, 2001. "Attention and the Art of Scientific Publishing," Tinbergen Institute Discussion Papers 01-022/1, Tinbergen Institute.
  3. Sims, Christopher A., 2003. "Implications of rational inattention," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 665-690, April.
  4. Ricardo Reis, 2004. "Inattentive Consumers," NBER Working Papers 10883, National Bureau of Economic Research, Inc.
  5. Justin P. Johnson & David P. Myatt, 2006. "On the Simple Economics of Advertising, Marketing, and Product Design," American Economic Review, American Economic Association, vol. 96(3), pages 756-784, June.
  6. Xavier Gabaix & David Laibson & Guillermo Moloche & Stephen Weinberg, 2006. "Costly Information Acquisition: Experimental Analysis of a Boundedly Rational Model," American Economic Review, American Economic Association, vol. 96(4), pages 1043-1068, September.
  7. Ricardo Reis, 2006. "Inattentive Producers," Review of Economic Studies, Oxford University Press, vol. 73(3), pages 793-821.
  8. Bryan Caplan & Tyler Cowen, 2004. "Do We Underestimate the Benefits of Cultural Competition?," American Economic Review, American Economic Association, vol. 94(2), pages 402-407, May.
  9. Gabaix, Xavier & Laibson, David Isaac & Moloche, Guillermo & Stephen, Weinberg, 2003. "The allocation of attention: theory and evidence," MPRA Paper 47339, University Library of Munich, Germany.
  10. Hirshleifer, David & Teoh, Siew Hong, 2003. "Limited attention, information disclosure, and financial reporting," Journal of Accounting and Economics, Elsevier, vol. 36(1-3), pages 337-386, December.
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Citations

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Cited by:
  1. Bharat Ramaswami & Sangeeta Bansal & Sujoy Chakravarty, 2013. "The Informational and signaling impacts of labels: Experimental evidence from India on GM foods," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 13-01, Indian Statistical Institute, New Delhi, India.
  2. Agnès Festré & Pierre Garrouste, 2012. "The ‘Economics of Attention’: A New Avenue of Research in Cognitive Economics," GREDEG Working Papers 2012-12, Groupe de REcherche en Droit, Économie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
  3. Avichai Snir & Daniel Levy, 2011. "Shrinking Goods and Sticky Prices: Theory and Evidence," Working Papers 2011-03, Department of Economics, Bar-Ilan University.
  4. Legge, Stefan & Schmid, Lukas, 2013. "Rankings, Random Successes, and Individual Performance," Economics Working Paper Series 1340, University of St. Gallen, School of Economics and Political Science.
  5. Falkinger, Josef, 2008. "Between Agora and Shopping Mall," IZA Discussion Papers 3524, Institute for the Study of Labor (IZA).
  6. Stephen Gibbons & Eric Neumayer & Richard Perkins, 2013. "Student Satisfaction, League Tables and University Applications," SERC Discussion Papers 0142, Spatial Economics Research Centre, LSE.
  7. Josef Falkinger, 2012. "Em-powering economics: Some thoughts on policy and financial markets," ECON - Working Papers 093, Department of Economics - University of Zurich.
  8. Josef Falkinger, 2008. "A welfare analysis of "junk" information and spam filters," SOI - Working Papers 0811, Socioeconomic Institute - University of Zurich.
  9. Dietmar Janetzko, 2014. "Using Twitter to Model the EUR/USD Exchange Rate," Papers 1402.1624, arXiv.org.

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