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.
Lingua originale | English |
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pagine (da-a) | 611-624 |
Numero di pagine | 14 |
Rivista | RAND Journal of Economics |
Volume | 46 |
DOI | |
Stato di pubblicazione | Pubblicato - 2015 |
Keywords
- Consumer protection
- Deceptive advertising
- Rational buyer