We study a market with rationally inattentive consumers who are unsure of the terms of the
offers made by firms, but can acquire information about the terms at a cost. In a symmetric
equilibrium, the price set by firms is continuously increasing in the cost of information for
consumers and decreasing in the number of firms operating. In addition, favorable a priori
information about a firm leads it to set a higher price, and a new entrant can increase
demand for incumbents. When consumers have heterogeneous costs of information, firms …

We study a market with rationally inattentive consumers who are unsure of the terms of the
offers made by firms, but can acquire information about the terms at a cost. In a symmetric
equilibrium, the price set by firms is continuously increasing in the cost of information for
consumers and decreasing in the number of firms operating. In addition, favorable a priori
information about a firm leads it to set a higher price, and a new entrant can increase
demand for incumbents. When consumers have heterogeneous costs of information, firms …