Creating Attachment through Advertising: Loss Aversion and Pre–Purchase Information
AbstractComplementing the existing literature on anchoring effects and loss aversion, we analyze how firms can influence loss–averse consumers’ willingness to pay by product information in the form of informative advertising rather than by prices. We find that consumers’ willingness to pay is greatest when only partial information about the product—i.e. only a fraction of product attributes—is disclosed, and that partial information disclosure is the optimal mode of advertising for a monopolistic firm. This causes the consumers’ realized product valuation to diverge from their intrinsic product valuation, which leads to a reduction of consumer surplus. Consequently, transparency policies can help to protect consumers.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 13/177.
Length: 50 pages
Date of creation: Mar 2013
Date of revision:
Advertising; Loss Aversion; Information Disclosure.;
Find related papers by JEL classification:
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
- M37 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Advertising
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-06 (All new papers)
- NEP-CBE-2013-04-06 (Cognitive & Behavioural Economics)
- NEP-COM-2013-04-06 (Industrial Competition)
- NEP-CTA-2013-04-06 (Contract Theory & Applications)
- NEP-CWA-2013-04-06 (Central & Western Asia)
- NEP-MIC-2013-04-06 (Microeconomics)
- NEP-MKT-2013-04-06 (Marketing)
- NEP-UPT-2013-04-06 (Utility Models & Prospect Theory)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Karle, Heiko & Kirchsteiger, Georg & Peitz, Martin, 2013.
"Loss Aversion and Consumption Choice: Theory and Experimental Evidence,"
Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order
79943, Verein für Socialpolitik / German Economic Association.
- Karle, Heiko & Kirchsteiger, Georg & Peitz, Martin, 2012. "Loss Aversion and Consumption Choice: Theory and Experimental Evidence," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9183, C.E.P.R. Discussion Papers.
- Rosato, Antonio, 2013. "Selling Substitute Goods to Loss-Averse Consumers: Limited Availability, Bargains and Rip-offs," MPRA Paper 47168, University Library of Munich, Germany.
- Fabian Herweg & Heiko Karle & Daniel Müller, 2014.
"Incomplete Contracting, Renegotiation, and Expectation-Based Loss Aversion,"
CESifo Working Paper Series
4687, CESifo Group Munich.
- Herweg, Fabian & Karle, Heiko & Müller, Daniel, 2014. "Incomplete Contracting, Renegotiation, and Expectation-Based Loss Aversion," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University 454, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.