Costly Advertising and Information Congestion: Insights from Pigou's Successors

Ryoji Jinushi

No e210, Working Papers from Tokyo Center for Economic Research

Abstract: As consumers have limited capacity to process information, advertisers must compete for attention. This creates information congestion which produces social loss like unread advertisements. We apply population games and best response dynamics to analyze information congestion. Multiple equilibria impair traditional policies, and thus, non-traditional policies are examined to lead the system to a Pareto efficient equilibrium. We achieve this by changing the cost per message multiple times during the evolutionary process. In this process, policymakers gradually but incompletely investigate externalities and adjust the speed of cost changes. Such complicated policies are costly, which confirms the inefficiency of advertising structures where advertisers send unsolicited messages.

Pages: 35 pages
Date: 2024-11
New Economics Papers: this item is included in nep-gth and nep-mic
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