Theoretical Economics, Volume 6, Number 1 (January 2011)

Theoretical Economics 6 (2011), 127–155


On the strategic use of attention grabbers

Kfir Eliaz, Ran Spiegler

Abstract


When a firm decides which products to offer or put on display, it takes into account the products' ability to attract attention to the brand name as a whole. Thus, the value of a product to the firm emanates from the consumer demand it directly meets, as well as the indirect demand it generates for the firms' other products. We explore this idea in the context of a stylzed model of competition between media content providers (broadcast TV channels, internet portals, newspapers) over consumers with limited attention. We characterize the equilibrium use of products as attention grabbers and its implications for consumer conversion, industry profits and (mostly vertical) product differentiation.

Keywords: Bounded rationality, irrelevant alternatives, limited attention, consideration sets, preferences over menus, marketing, persuasion, conversion rates, media platforms

JEL classification: C79, D03, M39

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