Addictive Platforms

Abstract

We study competition for consumer attention in which platforms choose the addictiveness of their services. A more addictive platform yields consumers a lower utility of participation but a higher marginal utility of allocating attention. The impact of competition depends on the scarcity of attention: If consumer attention is scarce, competition harms consumers compared to monopoly, because competing platforms have business stealing incentives and choose high addictiveness. Restricting consumers’ platform usage could reduce addictiveness and improve their welfare. Platforms decrease addictiveness when they can charge for services, but consumers may be better off when services are free but monetize attention.