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Competition for attention in the information (overload) age

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  • S. Anderson

    (Department of Economics, University of Virginia - Uniiversity of Virginia)

  • André De Palma

    (ENS Cachan - École Normale Supérieure de Cachan - École normale supérieure (ENS) - Cachan, Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

Abstract

Limited consumer attention limits product market competition: prices are stochastically lower the more attention is paid. Ads compete to be the lowest price in a sector but compete for attention with ads from other sectors: equilibrium ad shares follow a CES form. When a sector gets more proÞtable, its advertising expands: others lose ad market share. The "information hump" shows highest ad levels for intermediate attention levels. The Information Age takes off when the number of viable sectors grows, but total ad volume reaches an upper limit. Overall, advertising is excessive, though the allocation across sectors is optimal.

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Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00517721.

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Date of creation: 2012
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Publication status: Published, RAND Journal of Economics, 2012, 43, 1, 1-25
Handle: RePEc:hal:cesptp:hal-00517721

Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00517721
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Related research

Keywords: economics of attention; information age; price dispersion; advertising distribution; consumer attention; information Þltering; size distribution of Þrms; CES; information congestion.;

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  1. Baye, Michael R. & Morgan, John, 2002. "Information gatekeepers and price discrimination on the internet," Economics Letters, Elsevier, vol. 76(1), pages 47-51, June.
  2. Simon P. Anderson & André de Palma, 2009. "Information congestion," RAND Journal of Economics, RAND Corporation, vol. 40(4), pages 688-709.
  3. Grossman, Gene M & Shapiro, Carl, 1984. "Informative Advertising with Differentiated Products," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 51(1), pages 63-81, January.
  4. Butters, Gerard R, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 44(3), pages 465-91, October.
  5. Kyle Bagwell, 2005. "The Economic Analysis of Advertising," Discussion Papers, Columbia University, Department of Economics 0506-01, Columbia University, Department of Economics.
  6. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, Econometric Society, vol. 51(4), pages 955-69, July.
  7. Van Zandt, Timothy, 2001. "Information Overload in a Network of Targeted Communication," CEPR Discussion Papers 2836, C.E.P.R. Discussion Papers.
  8. Avinash Dixit & Victor Norman, 1978. "Advertising and Welfare," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 1-17, Spring.
  9. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June.
  10. Carl Shapiro, 1980. "Advertising and Welfare: Comment," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 749-752, Autumn.
  11. Stegeman, Mark, 1991. "Advertising in Competitive Markets," American Economic Review, American Economic Association, vol. 81(1), pages 210-23, March.
  12. Josef Falkinger, 2008. "A welfare analysis of "junk" information and spam filters," SOI - Working Papers 0811, Socioeconomic Institute - University of Zurich.
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Cited by:
  1. Florian Hoffmann & Roman Inderst & Marco Ottaviani, 2013. "Hypertargeting, Limited Attention, and Privacy: Implications for Marketing and Campaigning," Working Papers 479, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  2. Chiao, Benjamin & MacKie-Mason, Jeffrey, 2012. "Using uncensored communication channels to divert spam traffic," Information Economics and Policy, Elsevier, vol. 24(3), pages 173-186.

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