DP2836 Information Overload in a Network of Targeted Communication

Author(s): Timothy Van Zandt
Publication Date: June 2001
Keyword(s): Information Overload, Limited Attention
JEL(s): D62, D83
Programme Areas: Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=2836

As the costs of generating and transmitting information fall, the main bottlenecks in communication networks are becoming the human receivers, who are overloaded with information. For networks of targeted communication, this paper discusses the meaning of information overload, provides a theoretical treatment of its causes, and examines mechanisms for allocating the attention of receivers. Mechanisms for allocating attention include surcharges on communication and auctions. These mechanisms increase the cost of sending messages and shift the task of screening messages from the receivers to the senders. This shift may benefit both the receivers and the senders because the senders know the contents of the messages whereas the receivers do not. We show that, if the communication cost is low, then an increase in the communication cost benefits most (but not all) receivers. The increase benefits all the senders if either the extra cost is a tax that is redistributed to them as lump-sum transfers or if the senders' information about the receivers is sufficiently accurate.