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Persuasive Puffery

  • Archishman Chakraborty

    (Baruch College, City University of New York)

  • Rick Harbaugh

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

Sellers often make explicit or implicit product claims without providing evidence. We show that such "puffery" of product attributes through pure cheap talk is credible and helps buyers make a better decision. Puffing one attribute of a product leads buyers to positively update their impression of the product on that attribute, but also to negatively update their impression of the product on other attributes. Such updating pulls in buyers who value the puffed attribute, but pushes away other buyers who value other attributes. When the initial probability of a sale is low, there are more buyers to pull in than to push away, so the seller benefits from puffery. The legal distinction that permits puffery about subjective claims, but precludes puffery about objective facts, is shown to be consistent with the differences between cheap talk and persuasion models of communication.

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File URL: http://kelley.iu.edu/riharbau/RePEc/iuk/wpaper/bepp2012-05-chakraborty-harbaugh.pdf
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Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2012-05.

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Date of creation: Oct 2012
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Handle: RePEc:iuk:wpaper:2012-05
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