Limited Attention as the Scarce Resource in an Information-Rich Economy

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Limited Attention as the Scarce Resource in an Information-Rich Economy

Author Info

Josef Falkinger () (University of Zurich and IZA Bonn)

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Josef Falkinger

Abstract

This paper uses basic empirical facts from attention and perception psychology for a behavioral approach to equilibrium analysis at the industry and the macroeconomic level. The paper endogenously determines whether an economy is information-rich and whether scarcity of attention complements economic scarcity. A conventional economic equilibrium results if subjects have free attention capacity. At the positive level, the impacts of ITprogress, international integration and media on equilibrium diversity and level of attentionseeking activities are shown. At the normative level, welfare, efficiency and optimal policy interventions are characterized. Finally, behavioral effects of intensified attention-seeking on market power, sectoral economic structure and work-leisure choice are considered.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1538.

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Length: 51 pages
Date of creation: Mar 2005
Date of revision:
Handle: RePEc:iza:izadps:dp1538

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Find related papers by JEL classification:
D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

This paper has been announced in the following NEP Reports:

NEP-ALL-2005-04-03 (All new papers)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Ricardo Reis, 2004. "Inattentive Consumers," NBER Working Papers 10883, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Ricardo Reis, 2004. "Inattentive Consumers," Working Papers 135, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics.. [Downloadable!]
- Reis, Ricardo, 2005. "Inattentive Consumers," CEPR Discussion Papers 5053, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- Reis, Ricardo, 2006. "Inattentive consumers," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 1761-1800, November. [Downloadable!] (restricted)
Arjo Klamer & Hendrik P. van Dalen, 2001. "Attention and the Art of Scientific Publishing," Tinbergen Institute Discussion Papers 01-022/1, Tinbergen Institute. [Downloadable!]
Other versions:
- Arjo Klamer & Hendrik P. van Dalen, 2002. "Attention and the art of scientific publishing," Journal of Economic Methodology, Taylor and Francis Journals, vol. 9(3), pages 289-315, November. [Downloadable!] (restricted)
Hirshleifer, David & Lim, Sonya S. & Teoh, Siew Hong, 2004. "Disclosure to a Credulous Audience: The Role of Limited Attention," MPRA Paper 5198, University Library of Munich, Germany. [Downloadable!]
Josef Falkinger, 2003. "Attention Economies," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
Other versions:
- Falkinger, Josef, 2007. "Attention economies," Journal of Economic Theory, Elsevier, vol. 133(1), pages 266-294, March. [Downloadable!] (restricted)
Xavier Gabaix & David Laibson, 2002. "The 6D Bias and the Equity Premium Puzzle," Harvard Institute of Economic Research Working Papers 1947, Harvard - Institute of Economic Research. [Downloadable!]
Sims, Christopher A., 2003. "Implications of rational inattention," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 665-690, April. [Downloadable!] (restricted)
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. [Downloadable!] (restricted)
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. [Downloadable!] (restricted)
Shyam NMI Sunder & Matthew A. Cronin & Robert E. Kraut & James Morris & Rahul Telang, 2002. "Markets for Attention: Will Postage for Email Help?," Yale School of Management Working Papers ysm301, Yale School of Management. [Downloadable!]
Other versions:
- Shyam Sunder & Matthew A. Cronin & Robert E. Kraut & James Morris & Rahul Telang, 2003. "Markets for Attention: Will Postage for Email Help?," Yale School of Management Working Papers ysm394, Yale School of Management. [Downloadable!]
Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
Other versions:
- Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics. [Downloadable!]
Ricardo Reis, 2006. "Inattentive Producers," Review of Economic Studies, Blackwell Publishing, vol. 73(3), pages 793-821, 07. [Downloadable!] (restricted)
Other versions:
- Ricardo Reis, 2005. "Inattentive Producers," 2005 Meeting Papers 290, Society for Economic Dynamics. [Downloadable!]
- Ricardo Reis, 2005. "Inattentive Producers," NBER Working Papers 11820, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- Reis, Ricardo, 2005. "Inattentive Producers," CEPR Discussion Papers 5393, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)

Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Falkinger, Josef, 2007. "Distribution and Use of Knowledge under the “Laws of the Web”," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
Huberman, Bernardo & Wu, Fang, 2006. "Comparative Advante and Efficient Advertising in the Attention Economy," MPRA Paper 928, University Library of Munich, Germany. [Downloadable!]

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