Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171620
Authors: 
Karle, Heiko
Year of Publication: 
2013
Series/Report no.: 
Economics Working Paper Series 13/177
Abstract: 
Complementing the existing literature on anchoring effects and loss aversion, we analyze how firms can influence loss–averse consumers’ willingness to pay by product information in the form of informative advertising rather than by prices. We find that consumers’ willingness to pay is greatest when only partial information about the product—i.e. only a fraction of product attributes—is disclosed, and that partial information disclosure is the optimal mode of advertising for a monopolistic firm. This causes the consumers’ realized product valuation to diverge from their intrinsic product valuation, which leads to a reduction of consumer surplus. Consequently, transparency policies can help to protect consumers.
Subjects: 
Advertising
Loss Aversion
Information Disclosure
JEL: 
D83
L41
M37
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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