Discussion paper

DP9553 Competing for Consumer Inattention

Consumers purchase multiple types of goods and services, but may be able to examine only a limited number of markets for the best price. We propose a simple model which captures these features, conveying some new insights. A firm's price can deflect or draw attention to its market, and consequently, limited attention introduces a new dimension of competition across markets. We fully characterize the resulting equilibrium, and show that the presence of partially attentive consumers improves consumer welfare as a whole. When consumers are less attentive, they are more likely to miss the best offer in each market; but the enhanced cross-market competition decreases average price paid, as leading firms try to stay under the consumers' radar.


Eliaz, K, G de Clippel and K Rozen (2013), ‘DP9553 Competing for Consumer Inattention‘, CEPR Discussion Paper No. 9553. CEPR Press, Paris & London. https://cepr.org/publications/dp9553