This Post Will Be Barely Illuminating
posted by Dave Hoffman
Thanks to a reader of my recent paper on puffery, I recently came across the work of Andrew Ward and Lyle Brenner, Accentuate the negative: The positive effects of negative acknowledgment (forthcoming 2006; presentation link here). It is a neat paper, that examines the extent to which we credit messages that contain obvious warnings of their fallibility, and like messengers who introduce themselves with self-deprecation. Obviously, the study of deflation is less developed that that of optimism – and puffery – but it is an odd finding nonetheless that we seem to want any sales message except the unvarnished truth. I wonder if how the law can best take into account this psychological part of consumption. If we feel less cheated by, say, the purchase of stock which has been exposed as partly susceptible to a downturn through strategic pessimism, should the anti-fraud regimes of the ’33 and ’34 Acts account for this feeling?
More generally, it strikes me on first glance that the negative attribution effect may help to explain otherwise strange corporate events like the success of the self-deflating google IPO. (For Vic F’s branding theory, see this post; Ribstein’s comments here.)
It also helps to explain the odd persistence of the “shameless self-promotion” tag to law article announcement posts, even when the promotion benefits friends. Bill S., at TOTM, recently lamented this phrase, and said that “I don’t feel at all ashamed of doing this nor do I feel it is unseemly. Hence, I propose we drop the custom of including a “shameless self-promotion” reference when engaging in self-promotion.” I think Bill is leaving some money on the table here. Deflation, like puffery, moves flawed products.
May 30, 2006 at 8:15 pm
Posted in: Economic Analysis of Law
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Responses (1)
Ben - June 5, 2006 at 12:17 pm
Both of you seem to be assuming that consumer comprehension is static, which is wrong. People get burned by false messages and ads and from that consumers as a group change their attitudes about advertising. This is the reason ads in the 1950s differ from ads in the 2000s. Sure, there’s more puffery of late in general, but advertising is not the only factor people look to before buying. They also consider word of mouth, company reputation, and anybody bothering to do independent research into a particular product before buying it will also rely on independent information.
If puffery is over-regulated consumers will be dulled into not doing their own homework and believing the over-statements of big companies based on the knowledge that these statements are regulated. If puffery is allowed, consumers as a group with time learn to discount the the value of advertising, thereby becoming sharper consumers and thereby being encouraged to investigate before buying rather than relying on commercials.
I think any proposals that advocate too much regulation and caution have the ironic effect of making consumers more likely to fall victim to ‘supposedly’ regulated advertising. ‘Oh, the government is regulating this, so they can’t be lying.’ Needless to say companies are clever enough to avoid regulation and lie anyway, because enforcement of truth in advertising is too costly, therefore regulation is not only counterproductive, but inefficient and ineffective. Compare: cutting back on overprotective and paternalistic regulations encourages smart consumerism.
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