Limited attention as a scarce resource in information-rich economies
Falkinger uses basic facts from the psychology of attention to show how consumers' limited attention shapes economic competition. The article determines endogenously whether an economy is information rich or information poor. A conventional equilibrium results when subjects have spare attention capacity. It shows how advances in information technology, international integration and the media affect equilibrium diversity and the level of attention-seeking activity, and it addresses welfare, efficiency and optimal policy.
Falkinger uses basic facts from the psychology of attention to show how consumers' limited attention shapes economic competition. The article determines endogenously whether an economy is information rich or information poor. A conventional equilibrium results when subjects have spare attention capacity. It shows how advances in information technology, international integration and the media affect equilibrium diversity and the level of attention-seeking activity, and it addresses welfare, efficiency and optimal policy.
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Falkinger, J. (2008). Limited attention as a scarce resource in information-rich economies. Economic Journal, 118(532), 1596-1620. doi:10.1111/j.1468-0297.2008.02182.x https://doi.org/10.1111/j.1468-0297.2008.02182.x