Targeted information and limited attention
The authors are grateful to Jean-Michel Benkert, Alessandro Bonatti, Andrea Canidio, Fabrizio Germano, Julia Grünseis, Igor Letina, Armin Schmutzler, Aleksei Smirnov, Philipp Strack, and seminar participants at the University of Zurich, Swiss IO Day 2015 (Bern), the EEA Annual Congress 2016 (Geneva), the EARIE Annual Conference 2016 (Lisbon), and the XXXI Jornadas de Economía Industrial (Palma) for discussions and useful suggestions. They thank John Christian and Danielle Adams-Hausheer for proof-reading. They are also very thankful for the many helpful suggestions and critical remarks by two anonymous referees and the journal editor, Mark Armstrong. Liu acknowledges the financial support from the Key Laboratory of Mathematical Economics and Quantitative Finance (Peking University), the Ministry of Education of China. Hefti thanks Ines Brunner for her support.
Abstract
We examine the implications of limited consumer attention for the targeting decisions of competing firms. Limited attention alters the strategic role of information provision as firms may become incentivized to behave as mass advertisers, despite perfect targeting abilities. We analyze the consequences of limited attention for targeting, strategic pricing, market shares, attention competition between firms, and the value of marketing data to firms. Accounting for limited attention in an otherwise standard targeting framework can explain several recent key issues from the advertising industry, such as consumer-side information overload or the increased usage of ad blocking tools.
