Changed time and room! Seminar: Andrei Shleifer
Professor Andrei Shleifer from Harvard University will present in a joint seminar by the departments of "Applied Econometrics and International Economic Policy", "Management and Microeconomics" and "Money and Macroeconomics".
Title: Competition for Attention
Abstract: We present a model of market competition and product differentiation in which consumers’ attention is drawn to the products’ most salient attributes. Firms compete for consumer attention via their choices of quality and price. With salience, strategic positioning of each product affects how all other products are perceived. With this attention externality, depending on the cost of producing quality some markets exhibit “commoditized” price salient equilibria, while others exhibit “de-commoditized” quality salient equilibria. When the cost of producing quality changes, innovation can lead to a radical change in markets. In the context of financial innovation, the model generates the well documented phenomenon of “reaching for yield”.