Does Cheap Talk Affect Market Outcomes? Evidence from eBay

Daniel W. Elfenbein, Raymond Fisman and Brian McManus

American Economic Journal: Applied Economics, 2019, vol. 11, issue 4, 305-26

Abstract: We study cheap talk by firms and responses by their consumers, focusing on unverifiable promises of charitable donations on eBay during 2005–2006. Cheap talk listings have lower sales probabilities but sell at higher prices when successful. The negative relationship between cheap talk and sales is concentrated in the months following Hurricane Katrina, a time when verifiable and unverifiable charity listings increased dramatically. Finally, we show that cheap talk sellers have lower quality ratings than those making verifiable donations. Our results suggest that buyers (justifiably) avoid cheap talk listings when credible quality signals are available, thus limiting the extent of cheap talk.

JEL-codes: D12 D82 D83 L15 L31 M31 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/app.20170086
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/app.20170086 (application/pdf)
https://www.aeaweb.org/doi/10.1257/app.20170086.data (application/zip)
https://www.aeaweb.org/doi/10.1257/app.20170086.ds (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Does Cheap Talk Affect Market Outcomes? Evidence from eBay (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aejapp:v:11:y:2019:i:4:p:305-26

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Journal: Applied Economics is currently edited by Alexandre Mas

More articles in American Economic Journal: Applied Economics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().