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Competing to Persuade a Rationally Inattentive Agent

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  • Vasudha Jain
  • Mark Whitmeyer

Abstract

Firms strategically disclose product information in order to attract consumers, but recipients often find it costly to process all of it, especially when products have complex features. We study a model of competitive information disclosure by two senders, in which the receiver may garble each sender's experiment, subject to a cost increasing in the informativeness of the garbling. For a large class of parameters, it is an equilibrium for the senders to provide the receiver's first best level of information - i.e. as much as she would learn if she herself controlled information provision. Information on one sender substitutes for information on the other, which nullifies the profitability of a unilateral provision of less information. Thus, we provide a novel channel through which competition with attention costs encourages information disclosure.

Suggested Citation

  • Vasudha Jain & Mark Whitmeyer, 2019. "Competing to Persuade a Rationally Inattentive Agent," Papers 1907.09255, arXiv.org, revised Feb 2020.
    • Handle: RePEc:arx:papers:1907.09255
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    References listed on IDEAS

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    1. Raphael Boleslavsky & Christopher Cotton, 2018. "Limited capacity in project selection: competition through evidence production," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(2), pages 385-421, March.
    2. Ludmila Matyskova, 2018. "Bayesian Persuasion with Costly Information Acquisition," CERGE-EI Working Papers wp614, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    3. Elliot Lipnowski & Laurent Mathevet & Dong Wei, 2020. "Attention Management," American Economic Review: Insights, American Economic Association, vol. 2(1), pages 17-32, March.
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    Cited by:

    1. Matveenko, Andrei & Starkov, Egor, 2023. "Sparking curiosity or tipping the scales? Targeted advertising with consumer learning," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 172-192.

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