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Attention Manipulation and Information Overload

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  • Persson, Petra

Abstract

Limits on consumer attention give firms incentives to manipulate prospective buyers' allocation of attention. This paper models such attention manipulation and shows that it limits the ability of disclosure regulation to improve consumer welfare. Competitive information supply, from firms competing for attention, can reduce consumers' knowledge by causing information overload. A single firm subjected to a disclosure mandate may deliberately induce such information overload to obfuscate financially relevant information, or engage in product complexification to bound consumers' financial literacy. Thus, disclosure rules that would improve welfare for agents without attention limitations can prove ineffective for consumers with limited attention. Obfuscation suggests a role for rules that mandate not only the content but also the format of disclosure; however, even rules that mandate "easy-to-understand" formats can be ineffective against complexification, which may call for regulation of product design.

Suggested Citation

  • Persson, Petra, 2017. "Attention Manipulation and Information Overload," CEPR Discussion Papers 12297, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12297
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    Cited by:

    1. Persson, Petra, 2018. "Attention manipulation and information overload," Behavioural Public Policy, Cambridge University Press, vol. 2(1), pages 78-106, May.
    2. Sergei Mikhalishchev, 2020. "Optimal Menu when Agents Make Mistakes," CERGE-EI Working Papers wp670, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    3. Michael Grubb, 2015. "Behavioral Consumers in Industrial Organization: An Overview," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(3), pages 247-258, November.
    4. Michael D. Grubb, 2015. "Behavioral Consumers in Industrial Organization," Boston College Working Papers in Economics 879, Boston College Department of Economics.
    5. Timothy J. Richards & Gordon J. Klein & Celine Bonnet & Zohra Bouamra-Mechemache, 2020. "Strategic Obfuscation and Retail Pricing," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(4), pages 859-889, December.
    6. Matteo Migheli & Giovanni Battista Ramello, 2018. "The market of academic attention," Scientometrics, Springer;Akadémiai Kiadó, vol. 114(1), pages 113-133, January.
    7. Moshe Maor, 2020. "Policy over- and under-design: an information quality perspective," Policy Sciences, Springer;Society of Policy Sciences, vol. 53(3), pages 395-411, September.
    8. Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2016. "Competition for Attention," Review of Economic Studies, Oxford University Press, vol. 83(2), pages 481-513.
    9. Arbatskaya, Maria & Aslam, Maria Vyshnya, 2018. "Liability or labeling? Regulating product risks with costly consumer attention," Journal of Economic Behavior & Organization, Elsevier, vol. 154(C), pages 238-252.
    10. Johannes Abeler & Simon Jäger, 2013. "Complex Tax Incentives - An Experimental Investigation," CESifo Working Paper Series 4231, CESifo.
    11. Giuseppe Pernagallo & Benedetto Torrisi, 2019. "A Theory of Information overload applied to perfectly efficient financial markets," Papers 1904.03726, arXiv.org.
    12. Allred, Sarah & Duffy, Sean & Smith, John, 2016. "Cognitive load and strategic sophistication," Journal of Economic Behavior & Organization, Elsevier, vol. 125(C), pages 162-178.
    13. Duffy, Sean & Smith, John, 2014. "Cognitive load in the multi-player prisoner's dilemma game: Are there brains in games?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 51(C), pages 47-56.
    14. Arve, Malin & Honryo, Takakazu, 2015. "Delegation and Communication," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 524, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    15. Adams, Paul & Hunt, Stefan & Palmer, Christopher & Zaliauskas, Redis, 2021. "Testing the effectiveness of consumer financial disclosure: Experimental evidence from savings accounts," Journal of Financial Economics, Elsevier, vol. 141(1), pages 122-147.
    16. Prato, Carlo & Wolton, Stephane, 2013. "Rational Ignorance, Elections, and Reform," MPRA Paper 68638, University Library of Munich, Germany, revised 10 Dec 2015.
    17. Inderst, Roman & Obradovits, Martin, 2015. "Too Much Attention on Low Prices? Loss Leading in a Model of Sales with Salient Thinkers," CEPR Discussion Papers 10813, C.E.P.R. Discussion Papers.
    18. Hefti, Andreas, 2018. "Limited attention, competition and welfare," Journal of Economic Theory, Elsevier, vol. 178(C), pages 318-359.

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    More about this item

    Keywords

    Complexity; consumer protection; Disclosure regulation; Information Overload; Persuasion; salience;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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