Horizontal product differentiation with limited attentive consumers

Arbeitspapier

We analyze the effects of consumers' limited attention on welfare in a model of horizontal product differentiation. We present a novel approach of modeling limited attention: an attention radius. Each consumer only notices goods that are within her attention radius, i.e., goods that are sufficiently similar to her preferred version of the good. Limited attention induces firms to differentiate their products in a way that is beneficial to consumers. In addition, prices may be lower under limited than under full attention. Consumer surplus and welfare are not maximized under full attention but increase for some degree of limited attention.

Object Details

• ISBN: 978-3-943153-64-4
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: BERG Working Paper Series ; No. 143

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡ ; Oligopoly and Other Imperfect Markets
• Subject: Attention ; Horizontal Product Differentiation ; Hotelling ; Price Discrimination

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Saur, Marc P. ; Schlatterer, Markus G. ; Schmitt, Stefanie Yvonne
• Event: Veröffentlichung
• (who): Bamberg University, Bamberg Economic Research Group (BERG)
• (where): Bamberg
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/191904
• Last update: 10.03.2025, 11:44 AM CET