Deceptive advertising poses a significant challenge in the retail market, resulting in a loss of consumer surplus and diminished social welfare. However, consumers have become skeptical and actively seek reliable information when encountering advertisements. In cases where deceptive practices are exposed, the government can impose fines on companies while consumers boycott their products. Conversely, when deception goes undetected, consumers rely on advertised prices to inform their purchasing decisions. To counter consumer search behavior, deceptive companies may employ countermeasures to undermine search efforts. In this context, we examine a monopoly company that must choose among three product-advertising strategies in advertising: high-quality with high-statements, low-quality with low-statements, and low-quality with high-statements (deceptiveness). We construct a dynamic game model between the company and consumers, conducting a comprehensive analysis from the perspectives of profits, consumer surplus, and social welfare. We found that, if consumers lack trust in advertising, their search behavior may lead to a lemon market scenario in which the company fails to develop high-quality products. In scenarios with limited government supervision, refraining from punishment could be the optimal approach to maximize consumer surplus and social welfare. Compared to myopic consumers, strategic consumers' search behavior may have a negative impact on social welfare.
06月28日
2024
07月01日
2024
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