Competing for consumer inattention

Geoffroy de Clippel, Kfir Eliaz, Kareen Rozen

Research output: Contribution to journalArticlepeer-review

Abstract

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 crossmarket 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.

Original languageEnglish
Pages (from-to)1203-1234
Number of pages32
JournalJournal of Political Economy
Volume122
Issue number6
DOIs
StatePublished - 1 Dec 2014

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