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ADVERTISING AND PRODUCT QUALITY IN POSTED‐OFFER EXPERIMENTS
Author(s) -
Holt CHARLES,
Sherman ROGER
Publication year - 1990
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1990.tb00802.x
Subject(s) - quality (philosophy) , advertising , product (mathematics) , economics , market efficiency , microeconomics , business , marketing , financial economics , mathematics , philosophy , geometry , epistemology
Sellers selected both price and quality but buyers had limited information about those choices in the experiments reported here. Market efficiency was high under full information with truthful advertising of prices and qualities, but was much lower with no advertising of price or quality. Efficiency did not improve when sellers were permitted to advertise price, but not quality, and in half of these experiments “lemons” outcomes occurred. Although the range of outcomes is great, it cannot be claimed that price advertising improves efficiency when quality is unknown.