Advances in Economic Analysis & Policy, Vol. 6, No. 1, 2006
55 Pages Posted: 18 Feb 2011 Last revised: 26 Sep 2012
Date Written: February 15, 2011
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.
Keywords: Network Externalities, Call Externalities, Coase Theorem, Spam, UCE, Screening, Signaling, Filtering, Attention Markets
JEL Classification: C72, C78, D23, D6, D82, H21, O30
Suggested Citation: Suggested Citation
Loder, Thede C. and Van Alstyne, Marshall W. and Wash, Rick, An Economic Response to Unsolicited Communication (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. Available at SSRN: https://ssrn.com/abstract=1762212