Do “Made in USA” Claims Matter?

Xinyao Kong () and Anita Rao ()
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Xinyao Kong: Booth School of Business, University of Chicago, Chicago, Illinois 60637
Anita Rao: Booth School of Business, University of Chicago, Chicago, Illinois 60637

Marketing Science, 2021, vol. 40, issue 4, 731-764

Abstract: Firms often display product information on their front-of-package labels with some firms going as far as to make deceptive claims. We study the impact of the “Made in USA” claim—a disclosure not legally required on consumer-packaged goods and yet a claim highlighted by many firms, sometimes deceptively—on consumer demand. Leveraging the Federal Trade Commission’s investigation of four brands that resulted in removal of the claim from product packages, we study the impact such removal had on sales. We find a decline in demand following the removal of the “Made in USA” claim. Second, to ensure complete exogenous variation, we conduct a field experiment on eBay, on which we run more than 900 auctions, varying only whether a product contains this country-of-origin information. We find that, although products with the “Made in USA” claim have a slightly higher chance of drawing a zero valuation, such products obtain a 44% higher willingness-to-pay conditional on a positive valuation. However, this increased valuation is insufficient to economically justify firm relocation efforts. Auction transaction prices, on the other hand, are significantly and 28% higher with the claim, suggesting resellers and auctioneers have incentives to display the claim. The experiments alongside observational data allow us to rationalize firms’ incentives in making deceptive country-of-origin claims.

Keywords: field experiments; natural experiments; deceptive advertising; country-of-origin; FTC; public policy (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:40:y:2021:i:4:p:731-764

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