Competing for Consumer Inattention
AbstractConsumers purchase multiple types of goods and services, but may be able to examine only a limited number of markets for the best price. We propose a simple model which captures these features, conveying some new insights. A firm's price can deflect or draw attention to its market, and consequently, limited attention introduces a new dimension of competition across markets. We fully characterize the resulting equilibrium, and show that the presence of partially attentive consumers improves consumer welfare as a whole. When consumers are less attentive, they are more likely to miss the best offer in each market; but the enhanced cross-market competition decreases average price paid, as leading firms try to stay under the consumers' radar.
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Bibliographic InfoPaper provided by David K. Levine in its series Levine's Working Paper Archive with number 786969000000000765.
Date of creation: 19 Sep 2013
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Other versions of this item:
- de Clippel, Geoffroy & Eliaz, Kfir & Rozen, Kareen, 2013. "Competing for Consumer Inattention," CEPR Discussion Papers 9553, C.E.P.R. Discussion Papers.
- Geoffroy de Clippel & Kfir Elias & Kareen Rozen, 2013. "Competing for Consumer Inattention," Cowles Foundation Discussion Papers 1901, Cowles Foundation for Research in Economics, Yale University.
- D03 - Microeconomics - - General - - - Behavioral Economics; Underlying Principles
- D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
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