An Economic Response to Unsolicited Communication
Thede C. Loder
University of Michigan - Department of Electrical Engineering and Computer Science
Marshall W. Van Alstyne
Boston University – Questrom School of Business; Massachusetts Institute of Technology (MIT) - Sloan School
University of Michigan at Ann Arbor - School of Information
February 15, 2011
Advances in Economic Analysis & Policy, Vol. 6, No. 1, 2006
Boston U. School of Management Research Paper
MIT Sloan Research Paper No. 4880-11
If communication involves some transactions cost to both sender and recipient, what policy ensures that correct messages - those with positive social surplus - get sent? Filters block messages that harm recipients but benefit senders by more than transactions costs. Taxes can block positive value messages, and allow harmful messages through. In contrast, we propose an "Attention Bond," allowing recipients to define a price that senders must risk to deliver the initial message.
The underlying problem is first-contact information asymmetry with negative externalities. Uninformed senders waste recipient attention through message pollution. Requiring attention bonds creates an attention market, effectively applying the Coase Theorem to price this scarce resource. In this market, screening mechanisms shift the burden of message classification from recipients to senders, who know message content. Price signals can also facilitate decentralized two-sided matching. In certain cases, this leads to greater welfare than use of even "perfect" filters.
Number of Pages in PDF File: 55
Keywords: Network Externalities, Call Externalities, Coase Theorem, Spam, UCE, Screening, Signaling, Filtering, Attention Markets
JEL Classification: C72, C78, D23, D6, D82, H21, O30
Date posted: February 18, 2011 ; Last revised: September 26, 2012