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 C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9553.
Date of creation: Jul 2013
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Other versions of this item:
- 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.
- Geoffroy De Clippel & Kfir Eliaz & Kareen Rozen, 2013. "Competing for Consumer Inattention," Levine's Working Paper Archive 786969000000000765, David K. Levine.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-24 (All new papers)
- NEP-COM-2013-09-24 (Industrial Competition)
- NEP-GTH-2013-09-24 (Game Theory)
- NEP-MIC-2013-09-24 (Microeconomics)
- NEP-MKT-2013-09-24 (Marketing)
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