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Home | Events Archive | The Tragedy of Complexity

The Tragedy of Complexity

  • Location
    Tinbergen Institute
  • Date and time

    September 25, 2019
    12:45 - 14:00

This paper presents an equilibrium theory of product complexity. Complex products generate higher potential value, but require more attention from consumers. Because consumer attention is a limited common resource, an attention externality arises: Producers distort the complexity of their own products to grab attention from other products. This externality leads to an equilibrium distortion towards intermediate complexity—products that are well understood end up being too complex, whereas products that are not well understood are too simple. The model provides a categorization of goods according to both their absolute complexity as well as their complexity relative to first best.

Joint work with Martin Oehmke (LSE).