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False advertising
journal contribution
posted on 2017-11-17, 11:26 authored by Andrew Rhodes, Christopher WilsonChristopher WilsonThere 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.
Funding
Rhodes acknowledges financial support from the European Research Council (ERC) under the European Union’s Horizon 2020 research and innovation programme (grant agreement No 670494).
History
School
- Business and Economics
Department
- Economics
Published in
The RAND Journal of EconomicsVolume
49Issue
2Pages
348 - 369Citation
RHODES, A. and WILSON, C.M., 2018. False advertising. The RAND Journal of Economics, 49(2), pp. 348-369.Publisher
© The RAND Corporation. Publication by WileyVersion
- AM (Accepted Manuscript)
Publisher statement
This is the peer reviewed version of the following article: RHODES, A. and WILSON, C.M., 2018. False advertising. The RAND Journal of Economics, 49(2), pp. 348-369, which has been published in final form at https://doi.org/10.1111/1756-2171.12228. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions.Acceptance date
2017-10-30Publication date
2018-05-02ISSN
0741-6261eISSN
1756-2171Publisher version
Language
- en