We model digital platforms as attention brokers that have proprietary information about their users' product preferences and sell targeted ad space to retail product industries. Retail producers—incumbents or entrants—compete for access to this attention bottleneck. We discuss when increased concentration among attention brokers results in a tightening of the attention bottleneck, leading to higher ad prices, fewer ads being sold to entrants, and lower consumer welfare in the product industries. The welfare effect is characterized in terms of patterns of individual usage across platforms. A merger assessment that relies on aggregate platform usage alone can be highly biased.
Prat, Andrea, and Tommaso Valletti.
American Economic Journal: Microeconomics,
Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
Retail and Wholesale Trade; e-Commerce
Information and Internet Services; Computer Software