IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

False Advertising

Listed author(s):
  • Rhodes, Andrew
  • Wilson, Chris

There is widespread evidence that some firms use false advertising to overstate the value of their products. We consider a model in which a policymaker is able to punish such false claims. We characterize an equilibrium where false advertising actively influences rational buyers, and analyze the effects of policy under different welfare objectives. We establish precise conditions where policy optimally permits a positive level of false advertising, and show how these conditions vary intuitively with demand and market parameters. We also consider the implications for product investment and industry self-regulation, and connect our results to the literature on demand curvature.

If 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.

File URL: https://www.econstor.eu/bitstream/10419/161936/1/CPAWorkingPaperJune2017.pdf
Download Restriction: no

Paper provided by ZBW - German National Library of Economics in its series EconStor Preprints with number 128476.

as
in new window

Length:
Date of creation: 2017
Handle: RePEc:zbw:esprep:128476
Contact details of provider: Postal:
Düsternbrooker Weg 120, 24105 Kiel / Neuer Jungfernstieg 21, 20354 Hamburg

Phone: +49 431 8814-1
Fax: +49 431 8814-520
Web page: http://www.econstor.eu/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Emir Kamenica & Matthew Gentzkow, 2011. "Bayesian Persuasion," American Economic Review, American Economic Association, vol. 101(6), pages 2590-2615, October.
  2. Keisuke Hattori & Keisaku Higashida, 2012. "Misleading advertising in duopoly," Canadian Journal of Economics, Canadian Economics Association, vol. 45(3), pages 1154-1187, August.
  3. Avinash Dixit & Victor Norman, 1978. "Advertising and Welfare," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 1-17, Spring.
  4. Glaeser, Edward L. & Ujhelyi, Gergely, 2010. "Regulating misinformation," Journal of Public Economics, Elsevier, vol. 94(3-4), pages 247-257, April.
  5. Navin Kartik, 2009. "Strategic Communication with Lying Costs," Review of Economic Studies, Oxford University Press, vol. 76(4), pages 1359-1395.
  6. Simon P. Anderson & Régis Renault, 2006. "Advertising Content," American Economic Review, American Economic Association, vol. 96(1), pages 93-113, March.
  7. Mark Armstrong & Jidong Zhou, 2016. "Search Deterrence," Review of Economic Studies, Oxford University Press, vol. 83(1), pages 26-57.
  8. Roman Inderst & Marco Ottaviani, 2009. "Misselling through Agents," American Economic Review, American Economic Association, vol. 99(3), pages 883-908, June.
  9. John Cawley & Rosemary Avery & Matthew Eisenberg, 2013. "The Effect of Deceptive Advertising on Consumption of the Advertised Good and its Substitutes: The Case of Over-the-Counter Weight Loss Products," NBER Working Papers 18863, National Bureau of Economic Research, Inc.
  10. Eduardo Perez-Richet & Delphine Prady, 2012. "Complicating to Persuade?," Working Papers hal-00675135, HAL.
  11. Yongmin Chen & Marius Schwartz, 2015. "Differential pricing when costs differ: a welfare analysis," RAND Journal of Economics, RAND Corporation, vol. 46(2), pages 442-460, 06.
  12. Gill, David & Sgroi, Daniel, 2012. "The optimal choice of pre-launch reviewer," Journal of Economic Theory, Elsevier, vol. 147(3), pages 1247-1260.
  13. Andrew F. Daughety & Jennifer F. Reinganum, 2008. "Communicating quality: a unified model of disclosure and signalling," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 973-989.
  14. E. Glen Weyl & Michal Fabinger, 2013. "Pass-Through as an Economic Tool: Principles of Incidence under Imperfect Competition," Journal of Political Economy, University of Chicago Press, vol. 121(3), pages 528-583.
  15. Jonathan Zinman & Eric Zitzewitz, 2016. "Wintertime for Deceptive Advertising?," American Economic Journal: Applied Economics, American Economic Association, vol. 8(1), pages 177-192, January.
  16. Stephan Lauermann & Asher Wolinsky, 2016. "Search With Adverse Selection," Econometrica, Econometric Society, vol. 84, pages 243-315, 01.
  17. Dina Mayzlin & Yaniv Dover & Judith Chevalier, 2014. "Promotional Reviews: An Empirical Investigation of Online Review Manipulation," American Economic Review, American Economic Association, vol. 104(8), pages 2421-2455, August.
  18. Simon Cowan, 2012. "Third-Degree Price Discrimination and Consumer Surplus," Journal of Industrial Economics, Wiley Blackwell, vol. 60(2), pages 333-345, 06.
  19. E. Weyl & Michal Fabinger, 2015. "A Tractable Approach to Pass-Through Patterns," 2015 Meeting Papers 747, Society for Economic Dynamics.
  20. Justin P. Johnson & David P. Myatt, 2006. "On the Simple Economics of Advertising, Marketing, and Product Design," American Economic Review, American Economic Association, vol. 96(3), pages 756-784, June.
  21. E. Glen Weyl & Jean Tirole, 2012. "Market Power Screens Willingness-to-Pay," The Quarterly Journal of Economics, Oxford University Press, vol. 127(4), pages 1971-2003.
  22. Levent Celik, 2014. "A More General Framework to Analyze Whether Voluntary Disclosure is Insufficient or Excessive," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(2), pages 161-178, March.
  23. Roman Inderst & Marco Ottaviani, 2013. "Sales Talk, Cancellation Terms and the Role of Consumer Protection," Review of Economic Studies, Oxford University Press, vol. 80(3), pages 1002-1026.
  24. Mailath George J. & Okuno-Fujiwara Masahiro & Postlewaite Andrew, 1993. "Belief-Based Refinements in Signalling Games," Journal of Economic Theory, Elsevier, vol. 60(2), pages 241-276, August.
  25. Iñaki Aguirre & Simon Cowan & John Vickers, 2010. "Monopoly Price Discrimination and Demand Curvature," American Economic Review, American Economic Association, vol. 100(4), pages 1601-1615, September.
  26. David Dranove & Ginger Zhe Jin, 2010. "Quality Disclosure and Certification: Theory and Practice," Journal of Economic Literature, American Economic Association, vol. 48(4), pages 935-963, December.
  27. Mezzetti, Claudio & Tsoulouhas, Theofanis, 2000. "Gathering information before signing a contract with a privately informed principal," International Journal of Industrial Organization, Elsevier, vol. 18(4), pages 667-689, May.
  28. Kenneth S. Corts, 2013. "Prohibitions on False and Unsubstantiated Claims: Inducing the Acquisition and Revelation of Information through Competition Policy," Journal of Law and Economics, University of Chicago Press, vol. 56(2), pages 453-486.
  29. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-754, July/Aug..
  30. Salvatore Piccolo & Piero Tedeschi & Giovanni Ursino, 2015. "How Limiting Deceptive Practices Harms Consumers," DISCE - Working Papers del Dipartimento di Economia e Finanza def023, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  31. Doughety, Andrew F & Reinganum, Jennifer F, 1997. "Everybody Out of the Pool: Products Liability, Punitive Damages, and Competition," Journal of Law, Economics and Organization, Oxford University Press, vol. 13(2), pages 410-432, October.
  32. Salvatore Piccolo & Piero Tedeschi & Giovanni Ursino, 2015. "How limiting deceptive practices harms consumers," RAND Journal of Economics, RAND Corporation, vol. 46(3), pages 611-624, 09.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:zbw:esprep:128476. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.