IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp1538.html
   My bibliography  Save this paper

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

Author

Listed:
  • Falkinger, Josef

    () (University of Zurich)

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 IT-progress, international integration and media on equilibrium diversity and level of attention-seeking 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.

Suggested Citation

  • Falkinger, Josef, 2005. "Limited Attention as the Scarce Resource in an Information-Rich Economy," IZA Discussion Papers 1538, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp1538
    as

    Download full text from publisher

    File URL: http://ftp.iza.org/dp1538.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Falkinger, Josef, 2007. "Attention economies," Journal of Economic Theory, Elsevier, vol. 133(1), pages 266-294, March.
    2. Reis, Ricardo, 2006. "Inattentive consumers," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 1761-1800, November.
    3. 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.
    4. Arjo Klamer & Hendrik van Dalen, 2001. "Attention and the art of scientific publishing," Journal of Economic Methodology, Taylor & Francis Journals, vol. 9(3), pages 289-315.
    5. Shyam Sunder & Matthew Cronin & Darrin Filer & Robert Kraut & James Morris & Rahul Telang & Proceedings the, 2002. "Markets for Attention: Will Postage for Email Help?," Yale School of Management Working Papers ysm394, Yale School of Management, revised 01 Oct 2008.
    6. 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.
    7. Ricardo Reis, 2006. "Inattentive Producers," Review of Economic Studies, Oxford University Press, vol. 73(3), pages 793-821.
    8. Gabaix, Xavier & Laibson, David Isaac & Moloche, Guillermo & Stephen, Weinberg, 2003. "The allocation of attention: theory and evidence," MPRA Paper 47339, University Library of Munich, Germany.
    9. 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.
    10. Xavier Gabaix & David Laibson, 2002. "The 6D Bias and the Equity-Premium Puzzle," NBER Chapters,in: NBER Macroeconomics Annual 2001, Volume 16, pages 257-330 National Bureau of Economic Research, Inc.
    11. repec:pri:wwseco:dp232 is not listed on IDEAS
    12. 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.
    13. Sims, Christopher A., 2003. "Implications of rational inattention," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 665-690, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Josef Falkinger, 2008. "A welfare analysis of "junk" information and spam filters," SOI - Working Papers 0811, Socioeconomic Institute - University of Zurich.
    2. repec:wsi:acsxxx:v:11:y:2008:i:04:n:s0219525908001830 is not listed on IDEAS
    3. Leif Brandes & Egon Franck & Philipp Theiler, 2013. "The group size and loyalty of football fans: a two-stage estimation procedure to compare customer potentials across teams," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 176(2), pages 347-369, February.
    4. Roy Clemons, 2010. "Do external sources generate greater investor awareness that can affect a firm's value and cost of capital?," Review of Accounting and Finance, Emerald Group Publishing, vol. 9(4), pages 382-394, November.
    5. Andreas M. Hefti, 2011. "Attention competition," ECON - Working Papers 028, Department of Economics - University of Zurich.
    6. Huberman, Bernardo & Wu, Fang, 2006. "Comparative Advante and Efficient Advertising in the Attention Economy," MPRA Paper 928, University Library of Munich, Germany.
    7. Josef Falkinger, 2007. "Distribution and Use of Knowledge under the “Laws of the Web”," CESifo Working Paper Series 2154, CESifo Group Munich.

    More about this item

    Keywords

    media; information-rich economies; limited attention; diversity; behavioral equilibrium analysis;

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp1538. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak). General contact details of provider: http://www.iza.org .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.