Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/170620
Authors: 
Piccolo, Salvatore
Tedeschi, Piero
Ursino, Giovanni
Year of Publication: 
2015
Series/Report no.: 
Working Paper, Dipartimento di Economia e Finanza (DISCE), Università Cattolica del Sacro Cuore 23
Abstract: 
There are two competing sellers of an experience good, one offers high quality, one low. The low-quality seller can engage in deceptive advertising, potentially fooling a buyer into thinking the product is better than it is. Although deceptive advertising might seem to harm the buyer, we show that he could be better off when the low-quality seller can engage in deceptive advertising than not. We characterize the optimal deterrence rule that a regulatory agency seeking to punish deceptive practices should adopt. We show that greater protection against deceptive practices does not necessarily improve the buyer-welfare.
Subjects: 
Misleading Advertising
Deception
Bayesian Consumers
Asymmetric Information
JEL: 
L13
L15
L4
Document Type: 
Working Paper

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