Theories of voluntary disclosure suggest that even when disclosure is voluntary, market forces can drive firms to completely reveal information about their quality. This column investigates these predictions in an experimental setting. Laboratory results suggest widespread failures of the theoretical predictions – senders do not fully disclose, and receivers are not fully sceptical about non-disclosure. This suggests a role for policymakers to help customers understand the sound of silence.
Ginger Zhe Jin, Michael Luca, Daniel Martin, 22 July 2015
Vincenzo Galasso, Tommaso Nannicini, 22 September 2013
The perceived tone of a product or political advertisement affects public response – even holding constant the content of the message. This column provides evidence that men and women react differently to positive and negative tones in electoral advertisements. Negative advertising increases voter turnout among men but not women; positive advertising tends to win women’s sympathy but alienates men. This should inform gender-specific tailoring of targeted advertisements.
Ferdinand Rauch, 13 November 2012
Advertising is expensive and thus raises the cost of goods, but it may encourage competition that keeps prices down. This column addresses the old question with data from a natural experiment brought about by tax harmonisation in Austria. It argues that on average advertising decreases consumer prices and estimates that if the 5% tax were abolished, consumer prices would decrease by about 0.25 percentage points.
Diane Coyle, 03 December 2011
Have economists been asleep at the wheel? This column reports from a conference on the psychology and economics of ‘scarce attention’. Among the ideas discussed is whether too much information can blind decision-making and whether this can explain why so many economists missed the warning signs of a crisis.