Platform-Controlled Search and Distortions in Attention Allocation

Xiaoming Cai, Pieter Gautier, Ronald Wolthoff and Pieter A. Gautier

No 12760, CESifo Working Paper Series from CESifo

Abstract: We study a monopoly platform that sets meeting rates between buyers and two seller types: niche sellers, whose higher-quality good appeals to only some buyers, and mass-market sellers, whose good appeals to all. Sellers compete by posting prices à la Burdett and Judd (1983), so buyer surplus requires competition, while platform revenue requires seller rents. This tension creates a systematic distortion: as search capacity grows, the platform keeps niche exposure just past the saturation point---where extra attention erodes rents---and diverts the rest to mass-market sellers. Applied to Amazon product search and Google passage-ranking data, the model indicates buyer-surplus losses of 63 and 44 percent of the planner's benchmark, respectively. Letting buyer participation respond to the platform's recommendations disciplines it and shrinks this loss.

Keywords: attention allocation; Recommendation systems; search frictions; two-sided markets; enshittification of internet (search for similar items in EconPapers)
JEL-codes: D62 D83 L12 L40 (search for similar items in EconPapers)
Date: 2026
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