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Cheap‐talk advertising, product experience, and reputation concern

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  • Yuan Liu
  • Hongmin Chen

Abstract

As platforms have access to more users' data, platforms can know better about users' preferences. In this case, how would users choose a platform? Can platforms convey informative messages by cheap‐talk advertising? Our analytical model suggests that in the case of strong reputation concern, users prefer a known biased platform without reputation concern rather than an unknown platform. Because this unknown platform is more likely to recommend products that help the platform earn reputation, regardless of users' preferences. In semi‐separating equilibria, the unbiased platform truthfully reports its type while the biased platform mixes message on type report.

Suggested Citation

  • Yuan Liu & Hongmin Chen, 2022. "Cheap‐talk advertising, product experience, and reputation concern," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(7), pages 3165-3175, October.
    • Handle: RePEc:wly:mgtdec:v:43:y:2022:i:7:p:3165-3175
    DOI: 10.1002/mde.3588
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    References listed on IDEAS

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