|Title:||Limited attention, competition and welfare|
|Authors :||Hefti, Andreas|
|Published in :||Journal of economic theory|
|Publisher / Ed. Institution :||Elsevier|
|License (according to publishing contract) :||Licence according to publishing contract|
|Type of review:||Peer review (Publication)|
|Subjects :||Attention; Imperfect competition; Bounded rationality; Product differentiation; Salience; Contest theory|
|Subject (DDC) :||658.8: Marketing management|
|Abstract:||This article presents a tractable framework that embeds the allocation of limited attention into competition theory. Motivated by evidence from psychology and marketing a setting is studied where firms can manipulate consumer attention and compete in prices among perceived alternatives. The introduction of limited attention changes the positive and normative predictions obtained from otherwise standard models, such as Salop-style competition. Further, the model identifies when limited attention is beneficial or harmful to firms, and explains why the individually rational decision to become less attentive in presence of more choice options may be catalyzed to a collective inattention trap over the market mechanism.|
|Departement:||School of Management and Law|
|Organisational Unit:||Center for Economic Policy (FWP)|
|Publication type:||Article in scientific Journal|
|Appears in Collections:||Publikationen School of Management and Law|
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