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Unformatted text preview: On the Strategic Use of Attention Grabbers & K&r Eliaz y and Ran Spiegler z March 26, 2010 Abstract When a &rm decides which products to o/er or put on display, it takes into account the products¡ability to attract attention to the brand name as a whole. Thus, the value of a product to the &rm emanates from the consumer demand it directly meets, as well as the indirect demand it generates for the &rms¡other products. We explore this idea in the context of a stylzed model of competi- tion between media content providers (broadcast TV channels, internet portals, newspapers) over consumers with limited attention. We characterize the equi- librium use of products as attention grabbers and its implications for consumer conversion, industry pro&ts and (mostly vertical) product di/erentiation. KEYWORDS: marketing, irrelevant alternatives, limited attention, consider- ation sets, bounded rationality, preferences over menus, persuasion, conversion rates, media platforms 1 Introduction Consumers in the modern market place need to sort through an overwhelming number of available options, and hence, may not be able to pay serious attention to each and every feasible alternative. Consequently, some options may receive more attention than others. This may be due to the fact that some options are better than others along some salient dimension. For example, when searching for a laptop computer, a very low price or a very light weight will most likely draw one¡s attention; when ¢ipping & This is a substantial reformulation of material that originally appeared as part of a 2006 working paper titled £Consideration Sets and Competitive Marketing¤. We thank Amitav Chakravarti, Eddie Dekel, Barton Lipman, John Lynch, Ariel Rubinstein and numerous seminar participants for useful conversations. Spiegler acknowledges &nancial support from the ISF, the ERC, Grant no. 230251, and the ESRC (UK). y Department of Economics, Brown University, Providence, RI 02912. E-mail: K&[email protected] URL: http:¥¥www.econ.brown.edu¥fac¥K&r_Eliaz. z Department of Economics, University College London, Gower St., London WC1E 6BT, UK. E- mail: [email protected] URL: http:¥¥www.homepages.ucl.ac.uk¥~uctprsp¥ 1 through TV channels in search of a program to view, one may pay greater attention to a sensational news report, or to a special guest appearance by a celebrity on a sit-com. Alternatively, a consumer may pay more serious attention to items that are similar to options he is already familiar with. Thus, the mere o/ering of a particular item can have an indirect e/ect on a &rm¡s market share by drawing attention to the &rm and other items it o/ers. For instance, the items that stores display on their shop front and web retailers put on their home- pages can exert a positive externality on other items, by persuading consumers to enter the store¢website and browse its selection. Similarly, the shows and news items that a TV network chooses to broadcast may persuade viewers to stay tuned to that channel...
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This note was uploaded on 07/21/2011 for the course BUS 10001 taught by Professor All during the Spring '11 term at Shaheed Zulfiqar Ali Bhutto Institute of Science and Technology.
- Spring '11