Limited Attention as the Scarce Resource in an Information-Rich Economy

Josef Falkinger

No 1538, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper uses basic empirical facts from attention and perception psychology for a behavioral approach to equilibrium analysis at the industry and the macroeconomic level. The paper endogenously determines whether an economy is information-rich and whether scarcity of attention complements economic scarcity. A conventional economic equilibrium results if subjects have free attention capacity. At the positive level, the impacts of IT-progress, international integration and media on equilibrium diversity and level of attention-seeking activities are shown. At the normative level, welfare, efficiency and optimal policy interventions are characterized. Finally, behavioral effects of intensified attention-seeking on market power, sectoral economic structure and work-leisure choice are considered.

Keywords: diversity; limited attention; information-rich economies; media; behavioral equilibrium analysis (search for similar items in EconPapers)
JEL-codes: D50 D80 L10 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2005-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published - published in: Economic Journal, 2008, 118, 1596-1620

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