Journal
RAND JOURNAL OF ECONOMICS
Volume 43, Issue 1, Pages 1-25Publisher
WILEY-BLACKWELL
DOI: 10.1111/j.1756-2171.2011.00155.x
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Funding
- Direct For Social, Behav & Economic Scie
- Divn Of Social and Economic Sciences [0752923] Funding Source: National Science Foundation
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The Information Age has a surfeit of information received relative to what is processed. We model multiple sectors competing for consumer attention, with competition in price within each sector. Sector advertising levels follow a constant elasticity of substitution (CES) form, and within-sector prices are dispersed with a truncated Pareto distribution. The information hump shows highest ad levels for intermediate attention levels. Overall, advertising is excessive, although the allocation across sectors is optimal. The blame for information overload falls most on product categories with low information transmission costs and low profits.
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