Cheap-Talk Advertising and Misrepresentation in Vertically Differentiated Markets

Gardete, Pedro M.

doi:10.1287/mksc.2013.0772

Cited by 50 publications

(30 citation statements)

References 27 publications

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“…A recent theoretical literature has developed new models that allow ad content to matter in equilibrium by augmenting the canonical signaling model in a variety of ways (e.g. Anand and Shachar (2009) by allowing ads to be noisy and targeted; Anderson and Renault (2006) by allowing ad content to resolve consumers' uncertainty about their matchvalue with a product; and Mayzlin andShin (2011) andGardete (2013) by allowing ad content to induce consumers to search for more information about a product). Our paper is most closely related to a small empirical literature that has investigated the effects of ad content in field settings.…”

Section: Introductionmentioning

confidence: 99%

Advertising Content and Consumer Engagement on Social Media: Evidence from Facebook

2017

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We describe the effect of social media advertising content on customer engagement using data from Facebook. We content-code 106,316 Facebook messages across 782 companies, using a combination of Amazon Mechanical Turk and natural language processing algorithms. We use this data set to study the association of various kinds of social media marketing content with user engagement-defined as Likes, comments, shares, and click-throughs-with the messages. We find that inclusion of widely used content related to brand personality-like humor and emotion-is associated with higher levels of consumer engagement (Likes, comments, shares) with a message. We find that directly informative content-like mentions of price and deals-is associated with lower levels of engagement when included in messages in isolation, but higher engagement levels when provided in combination with brand personality-related attributes. Also, certain directly informative content, such as deals and promotions, drive consumers' path to conversion (click-throughs). These results persist after incorporating corrections for the nonrandom targeting of Facebook's EdgeRank (News Feed) algorithm and so reflect more closely user reaction to content than Facebook's behavioral targeting. Our results suggest that there are benefits to content engineering that combines informative characteristics that help in obtaining immediate leads (via improved click-throughs) with brand personality-related content that helps in maintaining future reach and branding on the social media site (via improved engagement). These results inform content design strategies. Separately, the methodology we apply to content-code text is useful for future studies utilizing unstructured data such as advertising content or product reviews. Stanford GSB AbstractWe investigate the effect of social media content on customer engagement using a large-scale field study on Facebook. We content-code more than 100,000 unique messages across 800 companies engaging with users on Facebook using a combination of Amazon Mechanical Turk and state-of-the-art Natural Language Processing algorithms. We use this large-scale database of advertising attributes to test the effect of ad content on subsequent user engagement − defined as Likes and comments − with the messages. We develop methods to account for potential selection biases that arise from Facebook's filtering algorithm, EdgeRank, that assigns posts non-randomly to users. We find that inclusion of persuasive content − like emotional and philanthropic content − increases engagement with a message. We find that informative content − like mentions of prices, availability and product features − reduce engagement when included in messages in isolation, but increase engagement when provided in combination with persuasive attributes. Persuasive content thus seems to be the key to effective engagement. Our results inform advertising design in social media, and the methodology we develop to content-code large-scale textual data provides a framework for f...

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Section: Introductionmentioning

confidence: 99%

Advertising Content and Consumer Engagement on Social Media: Evidence from Facebook

2017

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“…11 Farrell and Gibbons (1989) and Matthews and Postlewaite (1989) are seminal contributions. See Ye (2007), Chakraborty and Harbaugh (2010), Gardete (2013), Quint and Hendricks (2013), and Koessler and Skreta (2014) for some recent contributions.…”

Section: The Modelmentioning

confidence: 99%

Efficient Competition Through Cheap Talk: The Case of Competing Auctions

Kim¹,

Kircher²

2015

Econometrica

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We consider a large market where auctioneers with private reservation values compete for bidders by announcing cheap‐talk messages. If auctioneers run efficient first‐price auctions, then there always exists an equilibrium in which each auctioneer truthfully reveals her type. The equilibrium is constrained efficient, assigning more bidders to auctioneers with larger gains from trade. The choice of the trading mechanism is crucial for the result. Most notably, the use of second‐price auctions (equivalently, ex post bidding) leads to the nonexistence of any informative equilibrium. We examine the robustness of our finding in various dimensions, including finite markets and equilibrium selection.

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“…Moorthy and Srinivasan (1995) and Grossman (1981) consider money-back guarantees and product warranties as signaling instruments. Gardete (2013) considers a cheap talk communication by a firm. In our analysis, valuation uncertainty is only about consumer tastes or needs, and the firm does not have any private information about these attributes.…”

Section: Introductionmentioning

confidence: 99%

Demonstrations and Price Competition in New Product Release

Boleslavsky

Cotton

2017

Management Science

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract. We incorporate product demonstrations into a game theoretic model of firm price competition. Demonstrations may include product samples, trials, return policies, reviews, or any other means by which a firm allows consumers to learn about their value for a new product. In our model, demonstrations help individual consumers learn whether they prefer an innovation over an established product. The innovative firm controls demonstration informativeness. When prices can respond to demonstration policies, the firm prefers to provide maximumly informative demonstrations, which optimally segment the market, dampen subsequent price competition, and maximize profits. In contrast, when prices are less flexible, the firm prefers only partially informative demonstrations, designed to maximize its market share at prevailing prices. Such a strategy can generate the monopoly profit for the innovative firm. We contrast the strategic role of demonstrations in our framework with the strategic role of capacity limits in models of judo economics (e.g. Gelman and Salop 1983), which also allow firms to divide a market and reduce competition. Terms of use: Documents inDate: Current version: July 2015.

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Cheap-Talk Advertising and Misrepresentation in Vertically Differentiated Markets

Cited by 50 publications

References 27 publications

Advertising Content and Consumer Engagement on Social Media: Evidence from Facebook

Advertising Content and Consumer Engagement on Social Media: Evidence from Facebook

Efficient Competition Through Cheap Talk: The Case of Competing Auctions

Demonstrations and Price Competition in New Product Release

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