Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Monday, September 2, 2013

Competing for Consumer Inattention

Posted by D. Daniel Sokol 

Geoffroy de Clippel (Dept. of Economics, Brown University), Kfir Elias (Tel Aviv University & University of Michigan, Ann Arbor), Kareen Rozen (Cowles Foundation, Yale University) describe Competing for Consumer Inattention.

ABSTRACT: Consumers purchase multiple types of goods and services, but may be able to examine only a limited number of markets for the best price. We propose a simple model which captures these features, conveying some new insights. A firm's price can deflect or draw attention to its market, and consequently, limited attention introduces a new dimension of competition across markets. We fully characterize the resulting equilibrium, and show that the presence of partially attentive consumers improves consumer welfare as a whole. When consumers are less attentive, they are more likely to miss the best offer in each market; but the enhanced cross-market competition decreases average price paid, as leading firms try to stay under the consumers' radar.

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