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The Economics of Attention Markets

44 Pages Posted: 2 Oct 2017 Last revised: 1 Nov 2017

David S. Evans

Global Economics Group; University College London

Date Written: October 31, 2017

Abstract

This paper describes the fundamental economic features of the attention market in which platforms acquire time from consumers and sell access to that time to advertisers who want to deliver messages to those consumers. It introduces an economic framework for analyzing the allocation of time and shows that the attention market is an enormous part of the economy based on the time contributed to it. In 2016, American adults spent 437 billion hours mainly consuming content on ad-supported media based; that time was worth $7.1 trillion using the average after-tax hourly wage rate and $2.8 trillion using the average after-tax minimum wage rate. The paper shows that the exchange of content for time internalizes externalities between consumers and advertisers and that the use of content to harvest attention results in significant economic efficiencies. It then presents a simple model of the attention market, based on platforms competing for scarce attention and selling into a competitive market for advertising, and shows that this model is broadly consistent with key empirical regularities. Lastly, the paper shows that the attention market likely generates considerable consumer surplus from content creation as well as economic efficiency from intensifying competition through the delivery of advertising messages, many of which consumers would have avoided if they could.

Keywords: advertising, ad-supported media, newspapers, television, attention markets, online platforms, free Internet services, digital platforms, consumer surplus for free goods, attention economy

JEL Classification: D13, D12, D21, D22, D23, D40, D85, D83, J22, K21, L10, L86

Suggested Citation

Evans, David S., The Economics of Attention Markets (October 31, 2017). Available at SSRN: https://ssrn.com/abstract=3044858

David Evans (Contact Author)

Global Economics Group ( email )

111 Devonshire St.
Suite 900
Boston, MA 02108
United States

University College London ( email )

Gower St
London WC1E OEG, WC1E 6BT
United Kingdom

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