How limiting deceptive practices harms consumers

Piero Tedeschi, Giovanni Ursino, Salvatore Piccolo

Research output: Contribution to journalArticlepeer-review

20 Citations (Scopus)

Abstract

There are two competing sellers of an experience good, one offers high quality, one low. The low-quality seller can engage in deceptive advertising, potentially fooling a buyer into thinking the product is better than it is. Although deceptive advertising might seem to harm the buyer, we show that he could be better off when the low-quality seller can engage in deceptive advertising than not. We characterize the optimal deterrence rule that a regulatory agency seeking to punish deceptive practices should adopt. We show that greater protection against deceptive practices does not necessarily improve the buyer welfare.
Original languageEnglish
Pages (from-to)611-624
Number of pages14
JournalRAND Journal of Economics
Volume46
DOIs
Publication statusPublished - 2015

Keywords

  • Consumer protection
  • Deceptive advertising
  • Rational buyer

Fingerprint

Dive into the research topics of 'How limiting deceptive practices harms consumers'. Together they form a unique fingerprint.

Cite this