Limited Attention as a Scarce Resource in Information-Rich Economies

This article uses basic facts from the psychology of attention to show how the limited attention of consumers affects economic competition. The article determines endogenously whether an economy is information rich or information poor. A conventional economic equilibrium results if subjects have spare attention capacity. At the positive level, the respective impacts of advances in information technology, international integration and the media on equilibrium diversity and level of attention-seeking activities are shown. At the normative level, the issues of welfare, efficiency and optimal policy interventions are addressed.

[1]  James Morris,et al.  Markets for attention: will postage for email help? , 2002, CSCW '02.

[2]  Bernardo A. Huberman,et al.  The laws of the web - patterns in the ecology of information , 2001 .

[3]  V. Grossmann Advertising, in-house R&D, and growth , 2007 .

[4]  C. Sims Implications of rational inattention , 2003 .

[5]  K. Bagwell The Economic Analysis of Advertising , 2005 .

[6]  Josef Falkinger Limited Attention as the Scarce Resource in an Information-Rich Economy , 2005, SSRN Electronic Journal.

[7]  K. Bagwell Chapter 28 The Economic Analysis of Advertising , 2007 .

[8]  David Laibson,et al.  The Allocation of Attention: Theory and Evidence , 2003 .

[9]  H. Pashler The Psychology of Attention , 1997 .

[10]  Published by: American , 2022 .

[11]  Eunkyu Lee,et al.  Mastering the Mix: Do Advertising, Promotion, and Sales Force Activities Lead to Differentiation?: , 1994 .

[12]  David P. Myatt,et al.  On the Simple Economics of Advertising, Marketing, and Product Design , 2005 .

[13]  David I. Laibson,et al.  Costly Information Acquisition: Experimental Analysis of a Boundedly Rational Model , 2006 .

[14]  A. Dixit,et al.  Monopolistic competition and optimum product diversity , 1977 .

[15]  R. Dukas,et al.  Causes and Consequences of Limited Attention , 2004, Brain, Behavior and Evolution.

[16]  D. Simpson Implications for Economics , 2000 .

[17]  D. Hirshleifer,et al.  Limited Attention, Information Disclosure, and Financial Reporting , 2003 .

[18]  D. Kahneman,et al.  Attention and Effort , 1973 .

[19]  H. P. Dalen,et al.  Attention and the art of scientific publishing , 2001 .

[20]  Colin F. Camerer,et al.  The behavioral challenge to economics: understanding normal people , 2003 .

[21]  M. Greenberger Computers, Communications and the Public Interest , 1971 .

[22]  N. Kaldor,et al.  The Economic Aspects of Advertising , 1950 .

[23]  Fang Wu,et al.  The Economics of Attention: Maximizing User Value in Information-Rich Environments , 2008, Adv. Complex Syst..

[24]  Lakshman Krishnamurthi,et al.  The Effect of Advertising on Consumer Price Sensitivity , 1985 .

[25]  Thomas H. Davenport,et al.  The Attention economy , 2001, UBIQ.

[26]  Hal R. Varian,et al.  Information rules - a strategic guide to the network economy , 1999 .

[27]  G. Stigler The Economics of Information , 1961, Journal of Political Economy.