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Product lines, product design, and limited attention

Carsten Dahremöller and Markus Fels

Journal of Economic Behavior & Organization, 2015, vol. 119, issue C, 437-456

Abstract: We analyze the manner in which a monopolist designs its product line when facing customers with limited attention. We assume that consumers simplify complex problems by neglecting some relevant aspects. This creates an incentive for a firm to supply simple products. Simultaneously, limited attention offers partial protection to customers from the monopolist's market power. We further assume that customers’ attention varies with the set of alternatives. A firm may then manipulate its customers’ attention through the range of products it offers. We show that a firm can increase its profit by introducing goods that have the sole function of manipulating consumer attention. Finally, we analyze the impact of limited attention on the screening of heterogeneous customers.

Keywords: Limited attention; Salience; Focus; Product design; Product lines (search for similar items in EconPapers)
JEL-codes: D42 L12 L15 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1016/j.jebo.2015.09.007

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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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