Highlights 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.

    Abstract 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.


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    Titel :

    Deceptive advertising in a crowdfunding market


    Beteiligte:
    Zhang, Juan (Autor:in) / Huang, Jian (Autor:in)


    Erscheinungsdatum :

    2020-02-18




    Medientyp :

    Aufsatz (Zeitschrift)


    Format :

    Elektronische Ressource


    Sprache :

    Englisch




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