Competing to Persuade a Rationally Inattentive Agent

Vasudha Jain and Mark Whitmeyer

Papers from arXiv.org

Abstract: Firms strategically disclose product information in order to attract consumers, but recipients often find it costly to process all of it, especially when products have complex features. We study a model of competitive information disclosure by two senders, in which the receiver may garble each sender's experiment, subject to a cost increasing in the informativeness of the garbling. For a large class of parameters, it is an equilibrium for the senders to provide the receiver's first best level of information - i.e. as much as she would learn if she herself controlled information provision. Information on one sender substitutes for information on the other, which nullifies the profitability of a unilateral provision of less information. Thus, we provide a novel channel through which competition with attention costs encourages information disclosure.

Date: 2019-07, Revised 2020-02
New Economics Papers: this item is included in nep-com, nep-gth and nep-mic
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