Shill Advertising

Jeong-Yoo Kim and Nathan Berg

Economic Modelling, 2025, vol. 149, issue C

Abstract: Shill advertising occurs when sellers confidentially pay influencers to transmit favorable messages about a product. Here, we present a two-period model involving informed sellers, influencers, and second-period followers. Our model addresses why sellers of low-quality products engage more in shill advertising, despite the longstanding argument that high-quality sellers advertise more to encourage repeat purchases. We show that high-quality sellers have less incentive to engage in shill advertising, as doing so undermines the credibility of word-of-mouth communication from first-period influencers. This new insight into advertising behavior is primarily driven by what we call the “credibility effect”.

Keywords: Credence good; Experience good; Influencer; Follower; Shill marketing; Word-of-mouth (WoM) communication (search for similar items in EconPapers)
JEL-codes: D82 L15 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:149:y:2025:i:c:s0264999325000938

DOI: 10.1016/j.econmod.2025.107098

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