Artificial Shoppers and Attention Competition
We study how AI shopping interfaces affect price competition, platform profit, and consumer welfare. A platform hosts two of three products of different quality. Without AI, consumers compare the hosted pair under salience distortion and overweight whichever attribute, price or quality, stands out. Under assistance, an AI assistant recommends the two products with the highest true utility, leaving consumers to make the same distorted comparison. Under delegation, an AI agent selects the best product, subject to purchase approval. Both modes access all products and know consumers' preferences; firms price strategically. First, assistance can soften competition despite expanded product access. The middle-quality firm may forgo low-valuation consumers because attracting them requires cutting the price paid by higher-valuation consumers as well. Relative to no AI with the same assortment, assistance lowers both hosted prices under the high- and low-quality pair but can raise both under the high- and middle-quality pair. Second, we identify an alignment paradox: some consumers can become worse off than without AI even though their best option remains recommended and becomes cheaper. Salience can induce a switch to a lower-quality product whose quality loss exceeds the saving relative to the original purchase. The assistant ranks products accurately but does not optimize the shortlist for consumers' realized welfare. Third, assistance can raise both platform profit and aggregate consumer surplus with the high- and middle-quality pair; delegation can do so with the high- and low-quality pair. Fourth, among AI designs, the platform weakly prefers delegation with the high- and middle-quality pair wherever all compared pricing equilibria exist. Yet this preferred design can yield lower platform profit and aggregate consumer surplus than the no-AI optimum.