Competing to Persuade a Rationally Inattentive Agent
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.
Cite
@article{arxiv.1907.09255,
title = {Competing to Persuade a Rationally Inattentive Agent},
author = {Vasudha Jain and Mark Whitmeyer},
journal= {arXiv preprint arXiv:1907.09255},
year = {2020}
}