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Competition for attention in the Information (overload) Age

Author

Listed:
  • Simon P. Anderson
  • André de Palma

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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Suggested Citation

  • Simon P. Anderson & André de Palma, 2012. "Competition for attention in the Information (overload) Age," RAND Journal of Economics, RAND Corporation, vol. 43(1), pages 1-25, March.
    • Handle: RePEc:bla:randje:v:43:y:2012:i:1:p:1-25
    DOI: j.1756-2171.2011.00155.x
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    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D60 - Microeconomics - - Welfare Economics - - - General
    • I0 - Health, Education, and Welfare - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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