Essays in behavioral industrial organization, corruption, and marketing

In Chapter 1, I propose a model in which consumers base their purchasing decisions upon their recollections of the product quality, and in which firms can use persuasive advertising in order to change these recollections. Although consumers are aware that such advertising has occurred and take this into account when updating their beliefs about the product, they cannot prevent their memories from being affected. I analyze which firms engage in persuasive advertising as well as the price level that these firms choose. I show that persuasive advertising may be used in equilibrium even though consumers are fully aware of it, and that persuasive advertising does not always signal high quality products. The model is then extended to incorporate both persuasive and informative advertising, where firms reveal some verifiable information about their products. In that case, persuasive advertising may block the full unraveling of information, and high quality products are not promoted with only one type of advertising - in some cases, persuasive advertising can signal a product of either higher or lower quality than a product promoted with informative advertising. Chapter 2 is the product of joint work with Abhijit Banerjee and develops a model to study the effectiveness of complaints against corruption. A bureaucrat has to decide on a public infrastructure project in a village where a rich and a poor villagers live. A dishonest bureaucrat can be bribed not to choose the surplus maximizing project and instead to choose a project that favors the rich villager. Once the bureaucrat has chosen a project, the villagers can send a costly praising or complaining message to the bureaucrat's supervisor who does not know whether the bureaucrat is honest or dishonest.

Department dc:contributor.department

Massachusetts Institute of Technology. Dept. of Economics.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2007

Author dc:creator

• Lauga, Dominique Olié

Advisor dc:contributor.advisor

• Glenn Ellison, Abhijit Banerjee and Elie Ofek.

• Economics.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/41712

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/41712