Deceptive advertising in a crowdfunding market

Juan Zhang and Jian Huang

Transportation Research Part E: Logistics and Transportation Review, 2020, vol. 135, issue C

Abstract: Some creators in crowdfunding markets have recently employed deceptive advertising to overstate their product quality. We consider a model in which the policy maker would punish such false advertising when detecting it. Using a signaling framework, we examine how deceptive advertising influences rational buyers’ purchase decisions and how the creator signals its quality via advertising, as well as price. We show that the high-quality creator finds it optimal to use price and advertising jointly to deter low-quality creators’ mimicking behavior. Moreover, whether the deceptive advertising occurs in a crowdfunding market depends on the degree of the policy maker’s regulation. Counterintuitively, a stricter regulation on deceptive advertising might not always deter the low-quality creator from mimicking. Moreover, our results also indicate that allowing a moderate level of deceptive advertising might benefit consumers because the low-type creator’s deceptive claim might motivate the high-quality creator to cover more buyers.

Keywords: Crowdfunding; Deceptive advertising; Signaling game; Sharing economy (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1366554519309688
Full text for ScienceDirect subscribers only

Related works:
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:eee:transe:v:135:y:2020:i:c:s1366554519309688

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/journaldescription.cws_home/600244/bibliographic
http://www.elsevier. ... 600244/bibliographic

DOI: 10.1016/j.tre.2020.101892

Access Statistics for this article

Transportation Research Part E: Logistics and Transportation Review is currently edited by W. Talley

More articles in Transportation Research Part E: Logistics and Transportation Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().