Distracted from Comparison: Product Design and Advertisement with Limited Attention

Johannes Johnen and Benson Tsz Kin Leung

No 17234, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study how firms design products or information to influence consumers with limited attention. Consumers use their limited attention to either carefully study fewer products for match values or browse more products for price comparisons. A key finding is the `distraction effect', where firms pair high prices with dispersed match values to discourage price-comparison. While more-detailed match information improves matches, it discourages browsing and weakens competition. Whether consumers benefit depends on attention levels—with full attention it can help, but limited attention makes more-detailed information harmful. Therefore, when consumer attention is scarce, policies promoting coarser information can enhance consumer surplus by improving price competition.

Keywords: Limited attention; Product design; Information design; Market competition; Distracting consumers (search for similar items in EconPapers)
JEL-codes: D83 L13 L15 (search for similar items in EconPapers)
Date: 2022-04
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