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Regulating misinformation

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  • Glaeser, Edward L.
  • Ujhelyi, Gergely

Abstract

Governments have responded to misleading advertising by banning it, engaging in counter-advertising and taxing and regulating the product. In this paper, we consider the welfare effects of those different responses to misinformation. While misinformation lowers consumer surplus, its effect on social welfare is ambiguous. Misleading advertising leads to over-consumption but that may be offsetting the underconsumption associated with oligopoly outputs. If all advertising is misinformation then a tax or quantity restriction on advertising maximizes welfare, and other policy interventions are inferior. If firms undertake quality improving investments that are complementary to misinformation, then combining taxes or bans on misleading advertising with other policies can increase welfare.

Suggested Citation

  • Glaeser, Edward L. & Ujhelyi, Gergely, 2010. "Regulating misinformation," Journal of Public Economics, Elsevier, vol. 94(3-4), pages 247-257, April.
    • Handle: RePEc:eee:pubeco:v:94:y:2010:i:3-4:p:247-257
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    More about this item

    Keywords

    Misinformation Advertising Regulation Health;

    JEL classification:

    • A1 - General Economics and Teaching - - General Economics

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