American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
A Model of the Attention Economy: Data, Platforms, and Discovery
American Economic Review
(pp. 3802–36)
Abstract
This paper develops a dynamic model of the attention economy featuring two interlinked markets: a product market, where consumers have limited awareness of firms, and an attention market, where platforms attract attention by investing in free services (e.g., social media, streaming, podcasts) and sell targeted ads using data on consumer preferences. The model provides a tractable framework in which platform investment, ad-driven discovery, product demand, and ad revenue are jointly determined. The effects of data and interoperability policies can reverse over time, platform quality may be inefficiently high or low, and the rise of data-rich digital advertising can coincide with a declining ad revenue-to-GDP ratio.Citation
Chen, Daniel. 2026. "A Model of the Attention Economy: Data, Platforms, and Discovery." American Economic Review 116 (10): 3802–36. DOI: 10.1257/aer.20240651Additional Materials
JEL Classification
- D43 Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
- D44 Auctions
- D58 Computable and Other Applied General Equilibrium Models
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- L86 Information and Internet Services; Computer Software
- M37 Advertising