Tragedy of Complexity

Adam Zawadowski, Martin Oehmke  , - Nov 18, 2019

Working Paper No.   00055-00

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.

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