Séminaire GREDEG - Andreas Hefti (University of Zurich)

Limited Attention, Superstars and the Long tail
Quand ? Le 21-11-2019,
de 14:00 à 15:30
Où ? Room Picasso - GREDEG
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Andreas Hefti (University of Zurich)

More about Andreas Hefti

Title: Limited Attention, Superstars and the Long tail

Abstract:: This paper studies how the allocation of limited consumer attention may affect competition and the resulting market structure. Combining insights from neuroeconomics, psychology and information theory, we provide a micro-foundation for the attention of consumers towards advertising or messages and analyze how an increase in stimuli changes attentiveness, identifying a negative correlation. Given this set-up, if firms are only aware of the average attention in the market, a symmetric price equilibrium results and profits are ordered according to the attention allocation. Furthermore, if the average attentiveness declines, a Matthew effect occurs, hence we find a rich-gets-richer effect, where the wealthy firms get even wealthier in absolute terms, while simultaneously the difference in perception chances between firms gets smaller. Additionally, with endogenously determined attention, we characterize conditions for the Superstar phenomenon to arise and show that, by accounting for the laws of attention, our model challenges the emergence of a Long Tail effect.