This study examines the long-term efficacy of the Federal Trade Commission’s (FTC’s) 2003 Red Flag Initiative, which aimed to curb the prevalence of deceptive claims in over-the-counter weight loss ...product advertising. The principal component of this effort was the FTC’s promotion of voluntary guidelines which encouraged media outlets to screen advertisements for the seven deceptive (“Red Flag”) claims prior to publication. By analyzing the content of English-language advertisement airings appearing in nationally circulated print magazines and on television programs between 2010 and 2011, this study evaluates the success of the Red Flag Initiative as a long-term regulatory solution to deceptive advertising in this market. This study finds that the FTC’s voluntary initiative failed to halt the dissemination of deceptive claims during the time period analyzed. In response to the FTC’s actions, manufacturers appear to have engaged in offsetting behaviors and employed other creative content to convey similar deceptive information in their advertising, allowing them to avoid scrutiny while continuing to mislead consumers.
Deceptive advertising, or advertising that intends to mislead consumers by false claims or incomplete disclosure, is ubiquitous in the marketplace. Though prior research has shown that consumers ...generally view companies’ deceptive communication as unethical and react to it negatively, anecdotal evidence suggests that some consumers are more accepting of such misleading tactics than others. Delving deeper into this phenomenon, this research examines the role of self-construal on consumers’ responses toward deceptive advertising. Three studies provide converging evidence that interdependent (vs. independent) consumers are more tolerant of deceptive advertising, which is mediated by their attribution styles. Moreover, we further demonstrate the self-construal effect on lie acceptability decreases as the firm becomes smaller, when it is easier for consumers to pinpoint who should be responsible for the misconduct and thus are more likely to make internal attribution.
Misleading information pervades marketing communications, and is a long-standing issue in business ethics. Regulators place a heavy burden on consumers to detect misleading information, and a number ...of studies have shown training can improve their ability to do so. However, the possible side effects have largely gone unexamined. We provide evidence for one such side-effect, whereby training consumers to detect a specific tactic (illegitimate endorsers), leaves them more vulnerable to a second tactic included in the same ad (a restrictive qualifying footnote), relative to untrained controls. We update standard notions of persuasion knowledge using a goal systems approach that allows for multiple vigilance goals to explain such side-effects in terms of
goal shielding
, which is a generally adaptive process by which activation and/or fulfillment of a low-level goal inhibits alternative detection goals. Furthermore, the same goal systems logic is used to develop a more general form of training that activates a higher-level goal (general skepticism). This more general training improved detection of a broader set of tactics without the negative goal shielding side effect.
Despite the prevalence of unsubstantiated claims in online advertising of weight loss products (OAWP), consumers tend to believe they are less susceptible to advertising claims than others. Based on ...a sample of American women (N = 684), drawn from Mechanical Turk, the current study examined the third-person effect of OAWP. After confirming the robustness of the third-person perception hypothesis, a structural equation model examined the third-person effect (TPE) of OAWP on restrictive and corrective actions. On the perceptual component of TPE, the model also elaborates the effects of descriptive and injunctive norms, usage of weight loss products, and perceived deception on the presumed influence of OAWP on self and others. The results of SEM implied that prior use and injunctive norms played important roles in the likelihood that consumers support government regulation and engage in corrective action. Results also showed that as perceived deception of OAWP increased, so did the perceived influence of OAWP on others. Perceived deception also significantly increased support for government regulation of OAWP.
Retailers are in an arms race to attract customers to their websites and drive sales. This research examines how two techniques, inflated product claims and website interactivity, affect consumer ...evaluations of retailer websites. According to the Elaboration Likelihood Model (ELM), the authors argue that the use of strong, even inflated product claims leads to stronger website evaluations. The positive effects of inflated claims are bounded by website interactivity, which functions as a heuristic of the trustworthiness of a retailer's claims and website. Two studies demonstrate consistently that when website interactivity is high, the effects of inflated product claims are enhanced, whereas they are attenuated when website interactivity is low.
•Website interactivity affects the route of processing of product claims.•Greater website interactivity leads to stronger evaluations and trust and encourages peripheral processing.•Trust leads to strongest evaluations when paired with inflated product claims.•When website interactivity is low, consumers do not trust any product claims.
Much of the past learning and control literature has focused on the design of information acquisition processes for the demand side of information and has assumed that information supply is always ...genuine. However, in many economic and management settings, the information provider has incentives to strategically disseminate his/her private information, even in a possibly biased way. For example, a company may advertise deceptively to sell its products. In the paper “Learning Manipulation Through Information Dissemination,” Keppo, Kim, and Zhang take the perspective of an information provider and study the optimal manipulation of a learning process through the adaptive design of (mis)information. The authors explicitly characterize both the optimal manipulation policy and the learner’s belief process under such manipulation. They also extend their analysis to social learners who rely on public reviews to resist manipulation and show that social learning indeed mitigates misinformation in the long run.
We study optimal manipulation of a Bayesian learner through adaptive provisioning of information. The problem is motivated by settings in which a firm can disseminate possibly biased information at a cost, to influence the public’s belief about a hidden parameter related to the firm’s payoffs. For example, firms advertise to sell products. We study a sequential optimization model in which the firm dynamically decides on the quantity and content of information sent to the public, aiming to maximize its expected total discounted profits over an infinite horizon. We solve the associated Bayesian dynamic programming equation and explicitly characterize the optimal manipulation policy in closed form. The explicit solution allows us to further characterize the evolution of the public’s posterior belief under such manipulation over time. We also extend our analysis to consider the public as partially Bayesian social learners who rely on public reviews to resist manipulation. We show that the public asymptotically learns the truth in this extended setting.
Funding:
M. J. Kim is supported in part by the Natural Sciences and Engineering Research Council Discovery Grant RGPIN-2015-04019. J. Keppo is supported in part by the Institute of Operations Research and Analytics at the National University of Singapore Grant R-726-000-009-646.
Supplemental Material:
The e-companion is available at
https://doi.org/10.1287/opre.2021.2209
.
Deceptive advertising in a crowdfunding market Zhang, Juan; Huang, Jian
Transportation research. Part E, Logistics and transportation review,
March 2020, 2020-03-00, Letnik:
135
Journal Article
Recenzirano
•Prices play a supporting role in signaling quality and enhances the signaling effect of advertising.•The regulation on deceptive advertising influences the informative effect of advertising.•The ...high-quality creator could have a higher success rate when its quality is unknown to consumers.•The low-quality creator’s deceptive advertising could benefit the consumer surplus and social welfare.
Some creators in crowdfunding markets have recently employed deceptive advertising to overstate their product quality. We consider a model in which the policy maker would punish such false advertising when detecting it. Using a signaling framework, we examine how deceptive advertising influences rational buyers’ purchase decisions and how the creator signals its quality via advertising, as well as price. We show that the high-quality creator finds it optimal to use price and advertising jointly to deter low-quality creators’ mimicking behavior. Moreover, whether the deceptive advertising occurs in a crowdfunding market depends on the degree of the policy maker’s regulation. Counterintuitively, a stricter regulation on deceptive advertising might not always deter the low-quality creator from mimicking. Moreover, our results also indicate that allowing a moderate level of deceptive advertising might benefit consumers because the low-type creator’s deceptive claim might motivate the high-quality creator to cover more buyers.
Interpreting the language of contracts may be the most common and least satisfactory task courts perform in contract disputes. This Article proposes to take much of this task out of the hands of ...lawyers and judges, entrusting it instead to the public. The Article develops and tests a novel regime-the "survey interpretation method"-in which interpretation disputes are resolved through large surveys of representative respondents, by choosing the meaning that a majority supports. This Article demonstrates the rich potential for this method to examine variations of contractual language that could have made an intended meaning clearer. A similar survey regime has been applied successfully in trademark and unfair competition law for decades to interpret precontractual messages, and this Article shows how it could be extended to interpret contractual texts. The Article focuses on the interpretation of consumer contracts as the primary application of the proposed method, but demonstrates how the method could also apply to contracts between sophisticated parties. To demonstrate the technique, this Article applies the survey interpretation method to five real cases in which courts struggled to interpret contracts. It then provides normative, pragmatic, and doctrinal support for the proposed regime.
Examining a shocking array of fraud, corruption, theft, and embezzlement cases, this vivid collection reveals the practice of detecting, investigating, prosecuting, defending, and resolving ...white-collar crimes. Each chapter is a case study of an illustrative criminal case and draws on extensive public records around both obscure and high-profile crimes of the powerful, such as money laundering, mortgage fraud, public corruption, securities fraud, environmental crimes, and Ponzi schemes. Organized around a consistent analytic framework, each case tells a unique story and provides an engaging introduction to these complex crimes, while also introducing students to the practical aspects of investigation and prosecution of white-collar offenses. Jennifer C. Noble's text takes students to the front lines of these vastly understudied crimes, preparing them for future practice and policy work.
In the information economy, sellers can distort the truth about their products, and online intermediaries have incentives to skew the facts they provide to buyers. Mark Patterson discusses ways data ...can be manipulated for competitive advantage and consumer exploitation, and shows how courts can apply antitrust law to address these problems.
PDF
