Attention Oligopoly

43 Pages Posted: 14 Jul 2021

See all articles by Andrea Prat

Andrea Prat

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

Tommaso M. Valletti

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

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Date Written: June 2021

Abstract

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.

Suggested Citation

Prat, Andrea and Valletti, Tommaso M., Attention Oligopoly (June 2021). Available at SSRN: https://ssrn.com/abstract=3886673

Andrea Prat (Contact Author)

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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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