Attention Oligopoly

38 Pages Posted: 21 Jun 2018 Last revised: 2 Jun 2019

See all articles by Andrea Prat

Andrea Prat

Centre for Economic Policy Research (CEPR); Columbia Business School - Finance and Economics

Tommaso M. Valletti

Imperial College Business School; Centre for Economic Policy Research (CEPR)

Date Written: May 30, 2019

Abstract

We model social media platforms that have proprietary information about their users and sell targeted ad space to producers. Producers, who can be incumbents or entrants, compete for the attention of final consumers. We characterize equilibrium producer entry and consumer welfare in terms of ownership and consumption patterns in the social media industry. We show how the welfare effect of a platform merger can be expressed in terms of observable platform consumption. Relying on usage shares alone, but not on usage overlaps, can result in substantial bias in a merger assessment. We illustrate the findings with usage data from Facebook, Instagram, and Twitter.

Keywords: media mergers, attention oligopoly

JEL Classification: L13

Suggested Citation

Prat, Andrea and Valletti, Tommaso M., Attention Oligopoly (May 30, 2019). Available at SSRN: https://ssrn.com/abstract=3197930 or http://dx.doi.org/10.2139/ssrn.3197930

Andrea Prat (Contact Author)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

Tommaso M. Valletti

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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