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Shill Advertising

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  • Kim, Jeong-Yoo
  • Berg, Nathan

Abstract

Shill advertising occurs when sellers confidentially pay influencers to transmit favorable messages about a product. Here, we present a two-period model involving informed sellers, influencers, and second-period followers. Our model addresses why sellers of low-quality products engage more in shill advertising, despite the longstanding argument that high-quality sellers advertise more to encourage repeat purchases. We show that high-quality sellers have less incentive to engage in shill advertising, as doing so undermines the credibility of word-of-mouth communication from first-period influencers. This new insight into advertising behavior is primarily driven by what we call the “credibility effect”.

Suggested Citation

  • Kim, Jeong-Yoo & Berg, Nathan, 2025. "Shill Advertising," Economic Modelling, Elsevier, vol. 149(C).
    • Handle: RePEc:eee:ecmode:v:149:y:2025:i:c:s0264999325000938
    DOI: 10.1016/j.econmod.2025.107098
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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