buyer initiated vs seller initiated information revelation sales presentations are the core of the selling process where salespeople provide information to prospects one challenge is that the amount of information available to be potentially communicated may exceed salespeople s ability to communicate or customers ability to process there is limited bandwidth between the firm and customers one important decision then is which information should customers see what the firm chooses to tell customers may be informative in itself when constrained to a seller initiated information revelation format where the firm chooses which feature to show the firm never finds it optimal to offer more features than it is able to inform customers about consequently customers never find credible a claim that the product has all features the important implication is that price alone cannot serve as a signal of quality in this setting in contrast a buyer initiated information revelation format where customers decide which information to receive increases the probability of a sale and also results in the production of higher quality products in a competitive setting by adopting buyer initiated information revelation firms are able to attain positive profits this is due to the fact that customers infer the product s quality from the price along with the information revelation format customers know that at some prices firms find it profitable to produce high quality products and at other lower prices this is not the case thus customer empowerment leads to higher profits

media markets and localism does local news en espanol boost hispanic voter turnout the same time the availability of these products reduces the consumption of local news not only because some consumers prefer national and global content to local information but also because local media products that lose a significant number of consumers are forced to cut qual ity and they may even cease to exist if their audience falls below a critical threshold for these reasons some scholars claim that the rise of integrated media markets undermines local civic engagement robert d putnam 2000 against this backdrop many regulatory agencies including the federal communications commission fcc of the united states seek to protect local media and promote localism for instance by limiting ownership concentration 1 however localism is desirable only if there are in fact positive spillovers from the provision of local content that can help justify the loss of private welfare that integrated media markets would provide in this paper we propose a simple test for the existence of spillovers from local news pro gramming asking if the presence of local television news affects civic behavior the ubiq uity of local news programming across all us metro areas makes it impossible to study its effects on the general population in contrast the availability of spanish language news has increased considerably in recent years providing us with an experiment to study the effect of local news on one important measure of civic engagement voter turnout in local elections in particular we use a differencing approach asking whether hispanic voter turnout is higher in relation to non hispanic turnout in metro areas with spanish language local television news our results indicate that spanish language local television news raises hispanic turnout by more than 4 percentage points local news targeted at hispanics has no effect on the participa tion of non hispanics and as one would expect a significantly smaller effect in years with a presidential race in markets with spanish language news about a quarter of hispanics turn to these programs our estimates thus imply that news in spanish caused about a fifth of spanish language news viewers to start voting interestingly hispanics with access to news in spanish do not increase the time they spend watching news content analyses of spanish language news programs in the united states find that these shows are much more likely to report on

the costs of distribution in the uk life insurance market the cost of direct and independent distribution in the uk life insurance sector over the period 1990 1997 is examined this is a novel contribution to the literature that until now has focused almost solely on distribution in the non life sector unlike the non life sector the distribution of life insurance is complicated by the existence of investor protection policies which in the uk are believed to have increased the use of independent agents using a pooled data set of 44 companies between 1990 and 1997 this study finds little evidence for such a view cost benefits are found for firms focusing in one mode of distribution from a modelling of the distribution decision this finding maybe attributed to firms choosing distribution systems which match the transactional problems associated with their product mix and or mode of corporate governance

rent seeking with bounded rationality an analysis of the all pay auction the winner take all nature of all pay auctions makes the outcome sensitive to decision errors which we introduce with a logit formulation the equilibrium bid distribution is a fixed point the belief distributions that determine expected payoffs equal the choice distributions determined by expected payoffs we prove existence uniqueness and symmetry properties in contrast to the nash equilibrium the comparative statics of the logit equilibrium are intuitive rent dissipation increases with the number of players and the bid cost overdissipation of rents is impossible under full rationality but is observed in laboratory experiments our model predicts this property

content vs advertising the impact of competition on media firm strategy media firms compete in two connected markets they face rivalry for the sale of content to consumers and at the same time they compete for advertisers seeking access to the attention of these consumers we explore the implications of such two sided competition on the actions and source of profits of media firms one main conclusion we reach is that media firms may charge higher content prices in a duopoly than in a monopoly this happens because competition for advertisers can reduce the return per customer impression from the ad market making each firm less willing to underprice content to increase demand greater competitive intensity may thus increase content profits and decrease ad profits these findings are in sharp contrast to those in a regular one sided product market in which competition typically lowers product prices and profits we extend the framework to examine competition across different media e g between magazines and cable tv and show that firms in a duopolistic medium may benefit from more intense competition from a monopolist in another medium we characterize the conditions for each firm in the duopoly medium to bundle more ads and earn greater total profits than the rival firm in the monopoly medium

transparency and economic policy we provide a two period model of political competition in which voters imperfectly observe the electoral promises made to other voters imperfect observability generates an incentive for candidates to offer excessive transfers even if voters are homogeneous and taxation is distortionary government spending is larger than in a world of perfect observability transfers are partly financed through government debt and the size of the debt is higher in less transparent political systems the model provides an explanation of fiscal churning it also predicts that groups whose transfers are less visible to others receive higher transfers and that imperfect transparency of transfers may lead to underprovision of public goods from the policy perspective the main novelty of our analysis is a separate evaluation of the transparency of spending and the transparency of revenues we show that the transparency of the political system does not unambiguously improve efficiency transparency of spending is beneficial but transparency of revenues can be counterproductive because it endogenously leads to increased wasteful spending

agent discretion and the choice of insurance marketing system this article argues that different insurance marketing organizations arise as a means to minimize the costs of correctly matching policyholder risks with insurance coverage when policyholders are easily sorted without sales agent participation in screening exclusive dealing will be the preferred marketing organization when agent information is important for risk placement independent agency may be preferred empirical support for our theory is obtained from analysis of compensation contracts and market shares of the different marketing forms exclusive dealers are found to be prevalent in relatively standardized homogeneous product lines and markets and their agents receive less profit based compensation than those of independent agency insurers these findings are consistent with our theory

the principle of minimum differentiation holds under sufficient heterogeneity the so called principle of minimum differentiation stated by hotelling has been challenged by many authors this paper restores the principle by showing that n firms locate at the center of the market and charge prices higher than the marginal cost of production when heterogeneity in consumers tastes is large enough

market provision of broadcasting a welfare analysis this paper presents a theory of the market provision of broadcasting and uses it to address the nature of market failure in the industry advertising levels may be too low or too high depending on the nuisance cost to viewers the substitutability of programs and the expected benefits to advertisers from contacting viewers market provision may allocate too few or too many resources to programming and these resources may be used to produce programs of the wrong type monopoly ownership may produce higher social surplus than competitive ownership and the ability to price programming may reduce social surplus

the liability insurance market t his paper offers an overview of the u s liability insurance market and the link between its performance and developments in tort law over the last few decades the dominant feature of the insurance market has been the intermittent periods of rapidly rising premiums and cutbacks on the availability of coverage the insurance cycle appears to be increasing in amplitude and since the 1960s has been concentrated increasingly in liability lines an episode of rising premiums in the late 1960s was followed by a six year period of declining and eventually negative growth rates in total liability insurance premiums over the 1975 1977 period the annual growth rate jumped to 30 percent then followed another period of declining real premiums until premiums nearly tripled in 1984 1986 accompanied by cancellations of policies and massive withdrawal of insurers from some lines this crisis had an economic impact beyond the insurance market leading to the withdrawal of many goods and services from u s markets in mid 1987 the market began to turn again with premiums falling by as much as 40 percent for some commercial policies since then aggregate revenue from premiums has been relatively stable the liability insurance market is intertwined with the tort system in addition to providing incentives to avoid accidents the tort system allocates the risks of accident costs in providing compensation for accident victims the modern expansion of liability in tort law as described by priest in this issue represents a shift in the burden of supplying insurance from first party insurance markets to liability or third party insurance markets clearly this shift will

dissipation of contestable rents by small numbers of contenders the theory of rent seeking with its origins in the observations of gordon tullock 1967 or to use jagdish bhagwati s 1982 proposed term the theory of directly unproductive profit seeking activities is concerned with the potentially adverse effects on resource allocation of incentives to cap ture and defend artificially contrived rents and transfers the scope for so cial loss proposed by the theory derives from the relation between the value of a contestable prize and the value of the resources attracted into the con test to determine the beneficiary of the prize underlying this social loss is a specification of how rational behavior by optimizing agents links the value of the prize sought to the resources expended it has been traditional to assume competitive behavior in describing the activities of lobbying and influence seeking then if some further condi tions are satisfied l the total value of the resources expended precisely equals the value of the prize sought so dissipation is complete 2 conse quently the social cost associated with contestability of a rent can be in ferred from the value of the rent itself and the detailed and hard to come by information on individual outlays made in the course of the contest be comes unnecessary by basing their analyses on competitive dissipation contributors to the rent seeking literature see the review by robert tollison 1982 have been able to presume that the observed value of a contested rent is an exact measure of the associated social cost of monopoly power or regu lation similarly in the trade theoretic literature where the rights contested are to quota premia or revenues from trade taxes krueger 1974 bhagwati

persistent media bias abstract the news media plays an essential role in society but surveys indicate that the public views the media as biased this paper presents a theory of media bias that originates with private information obtained by journalists through their investigations and persists despite profit maximizing news organizations and rivalry from other news organizations bias has two effects on the demand for news first rational individuals are more skeptical of potentially biased news and thus rely less on it in their decision making this skepticism reduces demand and leads the news organization to set a lower price for its publication the greater is the bias it tolerates lower quality news thus commands a lower price second bias makes certain stories more likely than others given their private information journalists may bias their stories if their career prospects can be advanced by being published on the front page news organizations can control bias by restricting the discretion allowed to journalists but granting discretion and tolerating bias can increase profits if it allows journalists to be hired at a lower wage bias is not driven from the market by a rival news organization nor by a news organization with an opposing bias and the profits of a high bias news organization can be higher than the profits of a low bias one moreover bias can be greater with competition than with a monopoly news organization if individuals collectively choose regulation in place of their individual decision making bias increases the expected stringency of regulation

strategic disclosure of research results the cost of proving your honesty in situations where a biased sender provides verifiable information to a receiver i study how strategic reporting affects the incentives to search for information research provides series of signals that can be used selectively in reporting i show that the sender is strictly worse off when his research effort is not observed by the receiver he has to conduct more research than in the observable case and in equilibrium discloses all the information he obtained however this extra research can be socially beneficial and mandatory disclosure of results can thus be welfare reducing finally i identify cases where the sender withholds evidence and for which mandatory disclosure rules become more attractive in 2002 editors of eleven of the most prestigious medical journals announced that they would only publish the results of studies that were entered at their start in a publicly available database 1 pharmaceutical firms conduct clinical trials to test the efficacy and potential side effects of their drugs and to compare them to competitors products publishing results of studies is an efficient way to influence doctors prescriptions and patients tastes however firms can conduct multiple trials and select the most favourable results the system of mandatory disclosure adopted by medical journals is a response to the fear of such selective publishing 2 it makes the research effort of pharmaceutical firms more observable and will influence both the information they disclose and the amount of research they perform in the present article i study the interaction between the research and disclosure decisions which is an essential element in many settings the adoption of mandatory disclosure rules has subtle effects and i discover that leaving the research effort unobservable can sometimes be socially beneficial 3 i study the interaction between research and disclosure in a model where a biased sender searches for information and communicates it strategically to a receiver who will

informative advertising with differentiated products in this paper we study the role of promotional expenditures by sellers in a model of product differentiation advertising conveys full and accurate information about the characteristics of products heterogeneous consumers who have no source of information other than advertisements seek to purchase the products that best fit their needs despite the roles played by advertising in improving the matching of products and consumers and in increasing the elasticity of demand faced by each firm we find that the market determined levels of advertising are excessive given the extent of diversity in the market we derive a promotional equilibrium based on a specific information transmission technology paying explicit attention to the structure of consumer information and its impact on firms demand curves this allows us to study the effects of changes in the advertising technology including an increased ability to target messages to specific groups of consumers on the equilibrium in the product market we find that decreased advertising costs may reduce profits by increasing the severity of price competition

a model of expertise we study a model in which perfectly informed experts offer advice to a decision maker whose actions affect the welfare of all experts are biased and thus may wish to pull the decision maker in different directions and to different degrees when the decision maker consults only a single expert the expert withholds substantial information from the decision maker we ask whether this situation is improved by having the decision maker sequentially consult two experts we first show that there is no perfect bayesian equilibrium in which full revelation occurs when both experts are biased in the same direction it is never beneficial to consult both in contrast when experts are biased in opposite directions it is always beneficial to consult both indeed in this case full revelation may be induced in an extended debate by introducing the possibility of rebuttal

the competitive effects of exclusive dealing evidence from the u s beer industry abstract several recent theoretical articles have modeled the effects of exclusive dealing contracts that restrict dealers to selling a single brand yet detailed empirical analysis of the impact of exclusivity on actual market outcomes has been lacking i analyze a unique set of firm level data on nearly 400 beer distributors in the united states the impacts of economies of scale and restrictions on distributor promotional activities on the use of exclusive dealing are measured as well as the effects of exclusivity on costs prices and output the results support the view that exclusive dealing serves to minimize manufacturer dealer incentive conflicts and enhances social welfare

persuasion by cheap talk we consider the credibility persuasiveness and informativ eness of multidimensional cheap talk by an expert to a decision maker we find that an expert with state independent preferences can always make credible comparative statements that trade off the expert s incentive to exaggerate on each dimension such communication benefits the expert cheap talk is persuasive if her preferences are quasiconvex communication benefits a decision maker by allowing for a more informed decision but strategic interactions between multiple decision makers can reverse this gain we apply these results to topics including product recommendations voting auction disclosure and advertising jel d44 d72 d82 d83 m37

cheap talk and bogus network externalities in the emerging technology market many emerging technologies exhibit path dependent demands driven by positive network feedback such network effects profoundly impact marketing strategists thinking in today s network economy however the significant network externalities expected by many people often fail to materialize in the emerging technology market we analyze this phenomenon in the context of a technology distribution channel by studying cheap talk strategies under information asymmetry we show that incentive compatible contracts are essential for achieving credible information transmission in our model the better informed technology vendor has an incentive to inflate the retailer s ex ante belief of network externalities when a wholesale price contract is adopted when properly termed revenue sharing contracts are implemented there are information efficient cheap talk equilibria where truthful information transmission is mutually beneficial when the vendor s information is imperfect even revenue sharing contracts cannot guarantee credible information transmission if there is significant prior belief disparity between the vendor and the retailer this study demonstrates how information inefficient equilibria e g information blockage arise because of the conflict of interest or the conflict of opinion among channel members it also explores the role of cheap talk in facilitating channel coordination

price dispersion in an automobile insurance market from automobile insurance data for alberta over the period 1974 81 we find thatpremiums are highly correlated across driver classes in a given year but that premiums for a given driver class are not correlated over a period of more than 5 years firms relative market shares among drivers over age 25 and married males under 25 are inversely related to their deviations from the mean premiums in these driver classes the variance of real premiums decreases with the numberof firms in the market and increases with the real loss cost per car insured and the number of cars insured from these results we conclude that the price dispersion in automobile insurance in alberta is based on costly consumer search

balanced budget redistribution as the outcome of political competition this paper models balanced budget redistribution between socio economic groups as the outcome of electoral competition between two political parties equilibrium is unique in the present model and a sufficient condition for existence is given requiring that there be enough stochastic heterogeneity with respect to party preferences in the electorate the validity of hotelling s principle of minimum differentiation and of director s law are examined under alternative hypotheses concerning administrative costs of redistributions and voter s possibilities both of abstaining from voting and of becoming campaign activists for one of the parties the policy strategy of expected plurality maximization is contrasted with the strategy of maximizing the probability of gaining a plurality incomes are fixed and known so lump sum taxation is feasible however constraints on tax transfer differentiation between individuals are permitted in the analysis

news consumption and media bias bias in the market for news is well documented recent research in economics explains the phenomenon by assuming that consumers want to read watch news that is consistent with their tastes or prior beliefs rather than the truth the present paper builds on this idea but recognizes that i besides biased consumers there are also conscientious consumers whose sole interest is in discovering the truth and ii consistent with reality media bias is constrained by the truth these two factors were expected to limit media bias in a competitive setting our results reveal the opposite we find that media bias may increase when there are more conscientious consumers however this increased media bias does not necessarily hurt conscientious consumers who may be able to recover more information from multiple media outlets the more the outlets are biased we discuss the practical implications of these findings for media positioning media pricing media planning and the targeting of advertising

classroom games rent seeking and the inefficiency of non market allocations economics is often taught at a level of abstraction that can hinder some students from gaining basic intuition however lecture and textbook presentations can be complemented with classroom exercises in which students make decisions and interact the approach can increase interest in and decrease skepticism about economic theory this feature offers short descriptions of classroom exercises for a variety of economics courses with something of an emphasis on the more popular undergraduate courses suggestions for future columns and comments on past ones should be sent to charles holt c o journal of economic perspectives department of economics university of virginia charlottesville virginia 22903 3288

an information rationale for the power of special interests political decisions are often biased in favor of special interests at the expense of the general public and they are frequently inefficient in the sense that the losses incurred by the majority exceed the gains enjoyed by the minority this article explains the bias in terms of information asymmetries and the free rider problem first incumbents increase their reelection prospects by biasing policy toward groups that are better able to monitor their activities second because smaller groups are better able to overcome the free rider problem of costly monitoring policy will be biased in their favor third the effect of asymmetric monitoring on voter welfare is ambiguous the inefficiencies created by the policy bias are offset by a positively valued selection bias incumbents of above average quality are more likely to survive voter scrutiny than are low quality types

cheap talk advertising and misrepresentation in vertically differentiated markets i consider a cheap talk model in which a firm has a chance to communicate its product quality to consumers the model describes how advertising can be both informative to consumers and profitable for the firm through its content in a vertically differentiated market i find that advertising content may be effective in inducing search even if incentives for misrepresentation exist in particular a firm with an undesirable low quality product is able to attract consumers who would have not incurred a search cost had they known its true quality in this case a semiseparating equilibrium occurs where the lowest firm types pool upward in order to increase the expected product quality while simultaneously signaling that the product is affordable although consumers always benefit from truth in advertising total welfare may decrease if an undesirable firm is required to reveal its type finally i show that the extent to which misrepresentation can take place increases with the cost of advertising coverage

prices as signals of product quality this paper is concerned with the provision of quality in markets in which consumers have only imperfect information the analysis focuses on a market for a product that can be produced at different quality levels all consumers prefer higher to lower quality but they may differ in their willingness to pay for quality producers can produce any quality they like but higher qualities are more costly to produce the information in this market is imperfect in the sense that the exact quality chosen by a firm is known only to the firm itself some information about the quality of a firm s product will however reach its potential customers even if they do not make any special effort to acquire it within the framework suggested here two conclusions are drawn first prices may serve as signals which exactly differentiate the available quality levels that is there exists a fulfilledexpectations equilibrium at which each price signals a unique quality level second the pricesignals are not arbitrary each price signal exceeds the marginal cost of producing the quality it signals such a mark up depends on the nature of the product specific information received by consumers the poorer the information the higher the mark up

when does coordination require centralization this paper compares centralized and decentralized coordination when manag ers are privately informed and communicate strategically we consider a multi divisional organization in which decisions must be adapted to local conditions but also coordinated with each other information about local conditions is dispersed and held by self interested division managers who communicate via cheap talk the only available formal mechanism is the allocation of decision rights we show that a higher need for coordination improves horizontal com

the search for consistency in economic search previous experimental work has discovered several high performing heuristic strategies in the search for the most economic price of a good in situations where the purchaser has partial prior knowledge of the price distribution it appeared previously however that individuals do not use a given search rule consistently this paper describes a modified experimental framework that investigates this apparent inconsistency in search behaviour results are analysed at the individual level rather than in aggregate the paper concludes that individuals do adopt consistent strategies subject to certain identified caveats it is suggested that inconsistent behaviour is associated with decision difficulty very low search costs and subjects intellectual ability moreover it concludes that the strategy most frequently adopted is fairly crude and is not the best performing one

the market for news we investigate the market for news under two assumptions that readers hold beliefs which they like to see confirmed and that newspapers can slant stories toward these beliefs we show that on the topics where readers share common beliefs one should not expect accuracy even from competitive media competition results in lower prices but common slanting toward reader biases on topics where reader beliefs diverge such as politically divisive issues however newspapers segment the market and slant toward extreme positions yet in the aggregate a reader with access to all news sources could get an unbiased perspective generally speaking reader heterogeneity is more important for accuracy in media than competition per se

selective reporting of factual content by commercial media the authors study the market for factual content and examine whether competition increases or decreases its provision factual content is supplied by commercial media firms which observe a set of facts depicting the state of the world and selectively decide how to report them consumers value content that matches their opinion which incentivizes media firms to slant their reports by omitting certain facts novel features in the authors model include consumers ability to anticipate the media s incentives for slant and the requirement that all media stances must be supported by facts furthermore consumers find reports with more facts to be more convincing despite consumers ability to detect slant and their demand for factual support the research shows that competition results in consumers reading fewer facts and being unable to update their prior beliefs about the state of the world the authors also find that a monopoly medium may be more polarizing than competitive media and that polarized report

an experimental investigation of efficient rent seeking the debate about the measurement of the amount of rent dissipated in rent seeking activities is unable to be answered by observations from the naturally occurring environment current theoretical investigations have indicated that a number of factors will affect the amount of rent that can be assumed to be dissipated by rent seeking the theory of efficient rent seeking predicts that the number of rent seekers their risk posture their ability to enter and exit the rent seeking process and the manner in which the probability of receiving a rent is determined will affect the amount of rent that is dissipated

electoral competition and special interest politics have fixed positions on some issues but vary their positions on others in order to attract votes and campaign contributions in this context we examine whether special interest groups are governed by an electoral motive or an influence in their campaign giving and how their contributions affect the equilibrium platforms we show that each party is induced to behave as if it were maximizing a weighted sum of the aggregate welfares of informed voters and members of special interest groups the party that is expected to win a majority of seats caters more to the special interests

a signal jamming theory of predation we propose a new theory ofpredation based on signal jamming in our model the predator s characteristics are common knowledge while the entrant is uncertain of his own future profitability the entrant uses his current profit to decide whether to remain in the market and the predator preys to jam or interfere with this inference problem thus our model differs from those based on reputation effects in which the predator preys to signal information about himself

the cost of rent seeking evidence from cellular telephone license lotteries the inventors of the theory of rent seeking used an analogy with competitive markets to conclude that all monopoly rents would be dissipated in the competition to obtain the property rights to them 23 29 subsequent theorists showed that this conclusion is quite sensitive to assumptions about foresight risk aversion conjectures and bias 15 21 30 since little quantitative information about actual rent seeking competitions is available the theory has developed in an empirical vacuum in this paper we attempt to fill that vacuum with an estimate of rent seeking expenditure by applicants in the federal communications commission s fcc cellular telephone license lotteries held between 1986 and 1989 we go on to compare expenditures with estimates of the value of the licenses at stake these lotteries constitute a unique natural experiment any u s citizen was eligible to enter each geographic lottery once and only once for an expense which we calculate as modest the lotteries were widely publicized and heavily entered there were over 320 000 applications one per market filed for 643 cellular licenses and third party application preparers entered the market rapidly because licenses were awarded sequentially prospective participants in later lotteries could find out that expected net returns from earlier lotteries were positive because of undersubscription the value of the prize was known because sales of previously awarded licenses had begun to take place before later lotteries were held and market analysts were using such sale prices to value licenses not yet awarded the later lotteries seem almost optimally contrived to maximize the dissipation of rents yet comparing the resources invested in entry the price of a fully prepared application with the rents available the market value of cellular telephone licenses shows that dissipation was far short of complete

risk aversion and rent seeking an extension and some experimental evidence theoretical investigations indicate that the risk attitudes of individuals will effect the amount of rent that can be assumed to be dissipated by rent seeking activities following this line of investigation we extend hillman and katz s work to a small numbers case and demonstrate that the degree to which a monopoly rent is dissipated is dependent upon the structure of the risk attitudes of two risk averse individuals

mass media competition political competition and public policy if better informed voters receive favourable policies then mass media will affect policy because mass media provide most of the information people use in voting this paper models the incentives of the media to deliver news to different groups the increasing returns to scale technology and advertising financing of media firms induce them to provide more news to large groups such as taxpayers and dispersed consumer interests and groups that are valuable to advertisers this news bias alters the tradeoff in political competition and therefore introduces a bias in public policy the paper also discusses the effects of broadcast media replacing newspapers as the main information source about politics the model predicts that this change should raise spending on government programmes used by poor and rural voters

persuasive puffery sellers often make claims about product strengths without providing evidence even though such claims are mere puffery we show that they can be credible because talking up any one strength comes at the implicit trade off of not talking up another potential strength puffery pulls in some buyers who value product attributes that are talked up or emphasized while pushing away other buyers who infer that the attributes they value are relative weaknesses when the initial probability of making a sale is low there are more potential buyers to pull in than to push away so puffery is persuasive overall this persuasiveness requires that buyers have some privacy about their preferences so that the seller does not completely pander to them more generally the results show how comparative cheap talk by an expert to a decision maker can be credible and persuasive in standard discrete choice models used throughout marketing economics and other disciplines

the coexistence of distribution systems under price search theory and some evidence from insurance abstract this paper analyzes a pure price search model of an insurance market in which two different search technologies are simultaneously available sequential search and nonsequential search sequential search characterizes firms that sell directly to consumers and nonsequential search characterizes firms who use independent agents that sell the products of a number of different firms the separation of firms and consumers into the two market sectors is endogenously determined and the conditions for equilibrium coexistence are derived the characteristics of price distributions in the two sectors are then compared in a coexistence equilibrium price distributions observed in automobile insurance markets are found to be consistent with the predictions of the theoretical model

electoral competition with informed and uninformed voters i present a model of electoral competition in which candidates raise campaign contributions by choosing policies that benefit interest groups and then expend those contributions to influence voters who are uninformed about the policies informed voters however vote based on those policies so candidates face a trade off between choosing a policy to generate funds to attract the uninformed vote and choosing a policy to attract the informed vote electoral equilibria are characterized for two categories of policies particularistic and collective in the case of particularistic policies the equilibrium policies of the candidates are separated if the proportion of uninformed voters is sufficiently high and the degree of separation is an increasing function of that proportion the model is extended to include the public financing of elections and incumbency advantages for the case of collective policies the candidates locate at the median of the ideal points of the informed voters and contributions are zero