Limited Attention as the Scarce Resource in an Information-Rich Economy

51 Pages Posted: 30 Mar 2005

See all articles by Josef Falkinger

Josef Falkinger

University of Zurich - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Date Written: March 2005

Abstract

This paper uses basic empirical facts from attention and perception psychology for a behavioral approach to equilibrium analysis at the industry and the macroeconomic level. The paper endogenously determines whether an economy is information-rich and whether scarcity of attention complements economic scarcity. A conventional economic equilibrium results if subjects have free attention capacity. At the positive level, the impacts of IT-progress, international integration and media on equilibrium diversity and level of attention-seeking activities are shown. At the normative level, welfare, efficiency and optimal policy interventions are characterized. Finally, behavioral effects of intensified attention-seeking on market power, sectoral economic structure and work-leisure choice are considered.

Keywords: limited attention, information-rich economies, media, diversity, behavioral equilibrium analysis

JEL Classification: D50, D80, L10

Suggested Citation

Falkinger, Josef, Limited Attention as the Scarce Resource in an Information-Rich Economy (March 2005). IZA Discussion Paper No. 1538. Available at SSRN: https://ssrn.com/abstract=695205

Josef Falkinger (Contact Author)

University of Zurich - Department of Economics ( email )

Zuerich, 8006
Switzerland

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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