DP7863 On the Strategic Use of Attention Grabbers

Author(s): Kfir Eliaz, Ran Spiegler
Publication Date: June 2010
Keyword(s): bounded rationality, consideration sets, conversion rate, irrelevant alternatives, limited attention, marketing, media platforms, persuasion, preferences over menus
JEL(s): D03, D11, D21
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=7863

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 stylized 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.