ATTENTION ECONOMY AS A SOURCE OF MARKET FAILURE: A CAUSAL ANALYSIS OF DIGITAL EXTERNALITIES IN THE FORM OF PRODUCTIVITY LOSS AND MENTAL HEALTH IMPACTS

Abstract

The rapid expansion of digital technologies has transformed attention into a valu able economicresource, with digital platforms increasingly competing for user engage ment through personalised content, algorithmic recommendations, and behavioural tracking. While these developments have enhanced connectivity and access to infor mation, they have also raised concerns regarding excessive digital engagement, pro ductivity loss, and broader welfare implications. Against this backdrop, the present study investigates whether the attention economy contributes to market failure by ex amining how Digital Access and Asymmetric Information influence Screen Use Inten sity and Screen Addiction, and how these behavioural outcomes subsequently affect Productivity and Mental Hygiene. The study is grounded in Attention Economy Theory, Information Asymmetry Theory, Behavioural Economics, and Market Failure Theory. A conceptual framework was developed to analyse the relationships among the study variables. Primary data were collected from 174 digital users through a structured questionnaire. Exploratory Factor Analysis (EFA) was employed to examine the underlying factor structure of the measurement instrument, while Partial Least Squares Structural Equation Modelling (PLS-SEM) was used to assess the measurement model, structural relationships, me diation effects, and moderation effects. The findings reveal that both Digital Access and Asymmetric Information signif icantly increase Screen Use Intensity and Screen Addiction. The results indicate that individuals with greater access to digital technologies and those operating in envi ronments characterised by higher informational imbalances are more likely to engage intensively with digital platforms and develop addictive patterns of usage. Among the determinants examined, Asymmetric Information emerged as a particularly important factor influencing digital behaviour, highlighting the role of platform-controlled infor mation, personalised recommendations, and algorithmic engagement mechanisms. A key finding of the study is the distinction between Screen Use Intensity and Screen Addiction. While Screen Use Intensity did not significantly affect either Pro ductivity or Mental Hygiene, Screen Addiction exerted a strong and significant influ ence on Productivity and emerged as the primary behavioural mechanism linking dig ital market conditions to adverse outcomes. The mediation analysis further confirmed that Screen Addiction significantly mediates the effects of Digital Access and Asym metric Information on Productivity, whereas Screen Use Intensity does not function as a significant mediator. The moderation analysis revealed that Asymmetric Information xiii significantly moderates the relationship between Digital Access and Screen Use Inten sity but does not significantly moderate the relationship between Digital Access and Screen Addiction. The study concludes that the attention economy contributes to market failure pri marily through informational asymmetries and addiction-driven engagement rather than through digital usage alone. The findings suggest that productivity-related welfare losses arise when digital engagement develops into behavioural dependency, creating a divergence between private platform incentives and broader social welfare outcomes. By integrating perspectives from attention economy, information asymmetry, and be havioural economics literature, the study contributes to a deeper understanding of how digital platforms shape user behaviour and economic outcomes. The findings also of fer important implications for platform governance, algorithmic transparency, digital well-being policies, and regulatory interventions aimed at fostering a more balanced and welfare-enhancing digital ecosystem.