Competitive Disclosure Of Information To A Rationally Inattentive Agent

   Jul 13th, 2022
 
09:30 AM to 05:30 PM
 Online

Abstract

We study competitive disclosure of information on idiosyncratic product quality by two firms to a rationally inattentive consumer. Unless attention costs are low, there is an equilibrium in which the firms provide the consumer with as much information as she would process if she controlled information provision. This is not true if there is only one firm. We identify a novel channel through which the interaction of competition and inattention encourages information disclosure: information on one firm substitutes for information on the other, rendering a unilateral withholding of information unprofitable.

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