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AbstractWe examine the implications of limited consumer attention for the targeting decisions of competing firms. Limited attention alters the strategic role of information provision as firms may become incentivized to behave as mass advertisers, despite perfect targeting abilities. We analyze the consequences of limited attention for targeting, strategic pricing, market shares, attention competition between firms, and the value of marketing data to firms. Accounting for limited attention in an otherwise standard targeting framework can explain several recent key issues from the advertising industry, such as consumer‐side information overload or the increased usage of ad blocking tools.

Abstract
Existing literature has argued that firms benefit from confusing consumers of homogeneous goods. This paper shows that this insight generally breaks down with differentiated goods and heterogeneous preferences: with polarised taste distributions, firms fully educate consumers. In cases where firms nevertheless confuse consumers, the welfare consequences are worse than for homogeneous goods, as consumers choose dominated options. Similar insights are also obtained for political contests, in which candidates compete for voters with heterogeneous preferences: parties choose ambiguous platforms only when preferences are 'indecisive', featuring a concentration of indifferent voters.

Do firms seek to make the market transparent,or do they confuse the consumers in their product perceptions? We show that the answer to this question depends decisively on preference heterogeneity. Contrary to the well-studied case of homogeneous goods, confusion is not necessarily an equilibrium in markets with differentiated goods. In particular, if the taste distribution is polarized, so that indifferent consumers are relatively rare, firms strive to fully educate consumers. By contrast, if the taste distribution features a concentration of indecisive consumers, confusion becomes part of the equilibrium strategies. The adverse welfare consequences of confusion can be more severe than with homogeneous goods, as consumers may not only pay higher prices, but also choose a dominated option, or inefficiently refrain from buying. Qualitatively similar insights obtain for political contests, in which candidates compete for voters with heterogeneous preferences.