at Google ScholarTitle data
Egger, Hartmut ; Falkinger, Josef:
Limited Consumer Attention in International Trade.
In: Review of International Economics.
Vol. 24
(2016)
Issue 5
.
- pp. 1096-1128.
ISSN 1467-9396
DOI: https://doi.org/10.1111/roie.12249
Abstract in another language
This paper introduces a model of limited consumer attention into an otherwise standard new trade theory model with love-of-variety preferences and heterogeneous firms. In this setting, we show that international integration needs not be welfare enhancing if the consumers' capacity to gather and process information is limited. Rather, it intensifies competition for scarce consumer attention, which causes mutual overbidding of producers in their advertising expenditures. The mutual overbidding renders advertising—which is informative in principle—wasteful and diverts purchases to imported goods at an inefficient scale. Wasteful advertising provides scope for policy intervention in the form of an advertising tax. However, if the tax instrument is not allowed to discriminate against foreign producers, it cannot eliminate inefficient diversion of consumer purchases to imports; hence it needs not be successful in securing gains from international integration in this framework.
Further data
| Item Type: | Article in a journal |
|---|---|
| Refereed: | Yes |
| Keywords: | New trade theory; heterogeneous firms; gains from trade; love-of-variety preferences; limited attention; advertising |
| Subject classification: | D11, F12, F15, L10, M37 |
| Institutions of the University: | Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics II - International Macroeconomics and Trade > Chair Economics II - International Macroeconomics and Trade - Univ.-Prof. Dr. Hartmut Egger Faculties Faculties > Faculty of Law, Business and Economics Faculties > Faculty of Law, Business and Economics > Department of Economics Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics II - International Macroeconomics and Trade |
| Result of work at the UBT: | Yes |
| DDC Subjects: | 300 Social sciences > 330 Economics |
| Date Deposited: | 14 Oct 2016 11:20 |
| Last Modified: | 16 Jan 2024 12:31 |
| URI: | https://eref.uni-bayreuth.de/id/eprint/34937 |