Product Lines, Product Design and Limited Attention

44 Pages Posted: 31 Jan 2012 Last revised: 13 May 2014

See all articles by Carsten Dahremöller

Carsten Dahremöller

University of Bonn

Markus Fels

University of Dortmund - Department of Economics

Date Written: February 13, 2014

Abstract

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

Dahremöller, Carsten and Fels, Markus, Product Lines, Product Design and Limited Attention (February 13, 2014). Available at SSRN: https://ssrn.com/abstract=1993128 or http://dx.doi.org/10.2139/ssrn.1993128

Carsten Dahremöller

University of Bonn ( email )

Adenauerallee 24-42
D-53113 Bonn
Germany

Markus Fels (Contact Author)

University of Dortmund - Department of Economics ( email )

D-44221 Dortmund
Germany

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