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Persuasive Puffery

Author

Listed:
  • Archishman Chakraborty

    (Baruch College, City University of New York)

  • Rick Harbaugh

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

Abstract

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.

Suggested Citation

  • Archishman Chakraborty & Rick Harbaugh, 2012. "Persuasive Puffery," Working Papers 2012-05, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  • Handle: RePEc:iuk:wpaper:2012-05
    as

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    File URL: http://kelley.iu.edu/riharbau/RePEc/iuk/wpaper/bepp2012-05-chakraborty-harbaugh.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Wonsuk Chung & Rick Harbaugh, 2012. "Biased Recommendations," Working Papers 2012-02, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.

    More about this item

    Keywords

    cheap talk; discrete choice; sales talk; comparative advertising; negative advertising; unique selling point; privacy;

    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
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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