American Economic Journal: Microeconomics, Forthcoming
40 Pages Posted: 21 Jun 2018 Last revised: 5 Jun 2021
Date Written: May 25, 2021
We model digital platforms as attention brokers that have proprietary information about their users' product preference and sell targeted ad space to retail product industries. Retail producers -- incumbents or entrants -- compete for access to this attention bottleneck. We discuss when increased concentration among attention brokers results in a tightening of the attention bottleneck, leading to higher ad prices, fewer ads being sold to entrants, and lower consumer welfare in the product industries. The welfare effect is characterized in terms of patterns of individual usage across platforms. A merger assessment that relies on aggregate platform usage alone can be highly biased.
Keywords: media mergers, attention oligopoly
JEL Classification: L13
Suggested Citation: Suggested Citation