False Advertising

Andrew Rhodes () and Chris M Wilson

MPRA Paper from University Library of Munich, Germany

Abstract: There is widespread evidence that some firms use false advertising to overstate the value of their products. We consider a model in which a policymaker is able to punish such false claims. We characterize an equilibrium where false advertising actively influences rational buyers, and analyze the effects of policy under different welfare objectives. We establish precise conditions where policy optimally permits a positive level of false advertising, and show how these conditions vary intuitively with demand and market parameters. We also consider the implications for product investment and industry self-regulation, and connect our results to the literature on demand curvature.

Keywords: Misleading Advertising; Product Quality; Pass-through; Self-Regulation (search for similar items in EconPapers)
JEL-codes: D83 L15 M37 (search for similar items in EconPapers)
Date: 2016-07-18
New Economics Papers: this item is included in nep-com, nep-ind, nep-mic and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: False advertising (2018)
Working Paper: False advertising (2018)
Working Paper: False Advertising (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:72693

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