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Competition for attention in the Information (overload) Age

Authors


  • Anderson gratefully acknowledges research funding from the NSF under grant no. SES-0752923 and from the Bankard Fund at the University of Virginia. We thank the Autoridade da Concorrencia in Lisbon for its gracious hospitality, and the Portuguese-American Foundation for support. Comments from conference participants at EARIE 2007 (Valencia), Intertic-Milan (2008), the Economics of Advertising Conference in Bad Homburg (2008), and the CITE Conference on Information and Innovation in Melbourne (2009) and seminar participants at the Sauder School (UBC), Stern School (NYU), National University of Singapore, James Madison University, Catholic University of Leuven (KUL), and the universities of Oklahoma, New South Wales, Copenhagen, and North Carolina (Chapel Hill) are gratefully acknowledged. Suggestions from the editor and two referees were particularly helpful.

Abstract

The Information Age has a surfeit of information received relative to what is processed. We model multiple sectors competing for consumer attention, with competition in price within each sector. Sector advertising levels follow a constant elasticity of substitution (CES) form, and within-sector prices are dispersed with a truncated Pareto distribution. The “information hump” shows highest ad levels for intermediate attention levels. Overall, advertising is excessive, although the allocation across sectors is optimal. The blame for information overload falls most on product categories with low information transmission costs and low profits.

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