Competing for Consumer Inattention
Consumers purchase multiple types of goods but may be able to examine only a limited number of markets for the best price. We propose a simple model that captures these features, conveying new insights. A firm’s price can deflect or draw attention to its market, and consequently, limited attention introduces a new dimension of cross-market competition. We characterize the equilibrium and show that having partially attentive consumers improves consumer welfare. With less attention, consumers are more likely to miss the best offers; but enhanced cross-market competition decreases average price paid, as leading firms try to stay under the consumers’ radar.
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