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Persuasive Puffery

Archishman Chakraborty and Rick Harbaugh ()

No 2012-05, Working Papers from Indiana University, Kelley School of Business, Department of Business Economics and Public Policy

Abstract: Sellers often make explicit or implicit product claims without providing evidence. We show that such "puffery" of product attributes through pure cheap talk is credible and helps buyers make a better decision. Puffing one attribute of a product leads buyers to positively update their impression of the product on that attribute, but also to negatively update their impression of the product on other attributes. Such updating pulls in buyers who value the puffed attribute, but pushes away other buyers who value other attributes. When the initial probability of a sale is low, there are more buyers to pull in than to push away, so the seller benefits from puffery. The legal distinction that permits puffery about subjective claims, but precludes puffery about objective facts, is shown to be consistent with the differences between cheap talk and persuasion models of communication.

Keywords: cheap talk; discrete choice; sales talk; comparative advertising; negative advertising; unique selling point; privacy (search for similar items in EconPapers)
JEL-codes: C72 D72 D82 L15 (search for similar items in EconPapers)
Date: 2012-10
New Economics Papers: this item is included in nep-com and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Persuasive Puffery (2014) Downloads
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