Working Paper: CEPR ID: DP7863
Authors: 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 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.
Keywords: bounded rationality; consideration sets; conversion rate; irrelevant alternatives; limited attention; marketing; media platforms; persuasion; preferences over menus
JEL Codes: D03; D11; D21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| attention grabbers (Y60) | consumer attention (D18) |
| consumer attention (D18) | market share (L17) |
| attention grabbers (Y60) | market share (L17) |
| cost of adding attention grabbers (A21) | market share (L17) |
| number of attention grabbers (C78) | market share (L17) |
| healthy food options (I19) | sales of other items (Y90) |