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Addictive Platforms

Shota Ichihashi () and Byung-Cheol Kim ()

Staff Working Papers from Bank of Canada

Abstract: We study competition for consumer attention, in which platforms can sacrifice service quality for attention. A platform can choose the “addictiveness” of its service. A more addictive platform yields consumers a lower utility of participation but a higher marginal utility of allocating attention. We provide conditions under which increased competition can harm consumers by encouraging platforms to offer low-quality services. In particular, if attention is scarce, increased competition reduces the quality of services because business stealing incentives induce platforms to increase addictiveness. Restricting consumers’ platform usage may decrease addictiveness and improve consumer welfare. A platform’s ability to charge for its service can also decrease addictiveness.

Keywords: Economic; models (search for similar items in EconPapers)
JEL-codes: D40 L51 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2022-04
New Economics Papers: this item is included in nep-com, nep-ind, nep-mic, nep-ore, nep-pay, nep-reg and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:22-16

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