Competing for Consumer Inattention

40 Pages Posted: 10 Jul 2013

See all articles by Geoffroy de Clippel

Geoffroy de Clippel

Brown University - Department of Economics

Kfir Eliaz

Brown University

Kareen Rozen

Brown University - Department of Economics

Date Written: July 9, 2013

Abstract

Consumers purchase multiple types of goods and services, but may be able to examine only a limited number of markets for the best price. We propose a simple model which captures these features, conveying some new insights. A firm's price can deflect or draw attention to its market, and consequently, limited attention introduces a new dimension of competition across markets. We fully characterize the resulting equilibrium, and show that the presence of partially attentive consumers improves consumer welfare as a whole. When consumers are less attentive, they are more likely to miss the best offer in each market; but the enhanced cross-market competition decreases average price paid, as leading firms try to stay under the consumers' radar.

Keywords: limited attention, price competition, multiple markets

JEL Classification: D03, D04

Suggested Citation

de Clippel, Geoffrey and Eliaz, Kfir and Rozen, Kareen, Competing for Consumer Inattention (July 9, 2013). Cowles Foundation Discussion Paper No. 1901. Available at SSRN: https://ssrn.com/abstract=2291516 or http://dx.doi.org/10.2139/ssrn.2291516

Geoffrey De Clippel

Brown University - Department of Economics ( email )

64 Waterman Street
Providence, RI 02912
United States

Kfir Eliaz

Brown University ( email )

Economics Dept.
Box B
Providence, RI 02912
United States
401-863-2112 (Phone)
401-863-1970 (Fax)

HOME PAGE: http://www.econ.brown.edu/fac/Kfir_Eliaz/

Kareen Rozen (Contact Author)

Brown University - Department of Economics ( email )

64 Waterman Street
Providence, RI 02912
United States

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