Project Details
Projekt
Directed Allocation of Attention and Firms' Responses
Subject Area
Economic Policy, Applied Economics
Statistics and Econometrics
Economic Theory
Statistics and Econometrics
Economic Theory
Term
since 2023
Project identifier
Deutsche Forschungsgemeinschaft (DFG) - Project number 462020252
This project seeks to improve our understanding of how consumers direct attention to different tasks, and how consumer policies that aim to limit the exploitation of inattentive consumers affect the attention allocation of consumers. Competition in the marketplace together with the consumer protection regime determines what consumers need and want to pay attention to, and what consumer pay attention to feeds back into how firms compete for consumers in the first place. We study this nexus of interactions with a focus on consumer attention allocation. To achieve this objective, we will run carefully designed experiments in order to learn more about how well consumer attention allocation decisions correspond to those predicted by existing theories. This will provide a better understanding of how individuals divide cognitive resources across tasks. In market settings, the optimal design of products and contracts by firms affects how consumers allocate their attention across tasks and markets, which in turn feeds back into firms’ decisions how to design products and contracts. Furthermore, consumer policy, which in OECD countries heavily regulates which products and contracts firms may offer in the market, determines how much attention consumers need to spend to avoid being exploited, and thus interacts with consumer attention allocation decisions as well as firms’ strategic decisions. We thus plan to study the impact of various regulatory choices on consumer attention decisions and market outcomes theoretically. Finally, complementing the laboratory evidence as well as the theory developed, we plan to use observational evidence to test how firms respond to limited attention of consumers in the field. We plan to empirically study whether firms discriminate against consumers with more limited attention or lower cognitive ability. We anticipate that our research generates important new insights on the pros and cons of different consumer-protection-regulation regimes.
DFG Programme
Research Units
