Distracted from Comparison: Product Design and Advertisement with Limited Attention

Abstract

We study how firms choose designs—of products or information—to direct consumers’ limited attention. Consumers with limited attention either study fewer products carefully to learn match values, or superficially browse prices of more products. We highlight a novel distraction effect: to distract consumers from price-comparison, firms combine larger prices with designs that disperse match values. Thus, firms disclose excessively-detailed product information: information improves matches, but distracts consumers from price-comparison, relaxing competition. If consumer attention is sufficiently scarce, more-detailed information harms consumers. In contrast, interventions towards coarser and easily-available information—e.g. front-package-food labels like nutriscores—increase competition.