Product Lines, Product Design and Limited Attention
44 Pages Posted: 31 Jan 2012 Last revised: 13 May 2014
Date Written: February 13, 2014
We analyze how a monopolist designs its product line when facing customers with limited attention. We assume that consumers simplify complex problems by neglecting some relevant aspects. This creates an incentive to for the firm to supply simple products. At the same time, limited attention offers customers partial protection from the monopolist's market power. We further assume that customers' attention varies with the set of alternatives. A firm may then influence its customers' attention through the range of products it makes available. We show that a firm can increase its profit by introducing goods that have the sole function of manipulating consumer attention. We discuss the optimal design of such manipulating devices.
Keywords: Limited Attention, Salience, Focus, Product Design, Product Lines
JEL Classification: D42, L12, L15
Suggested Citation: Suggested Citation