On the Interaction Between Cheap-Talk Advertising and Credible Product Reviews

Xue Jia; Jeroen Suijs

doi:10.1177/10591478241279987

On the Interaction Between Cheap-Talk Advertising and Credible Product Reviews

Xue Jia^*, Jeroen Suijs

^*Corresponding author for this work

Research output: Contribution to journal › Article › Academic › peer-review

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Abstract

This paper investigates the interaction between cheap-talk advertising and credible third-party product reviews to inform customers about product quality. We find that cheap-talk advertising can be informative when the firm’s private information helps predict a credible product review. A more informative credible product review has two effects on cheap-talk advertising. First, a credible product review plays a disciplinary role that enables the firm to provide informative advertising. Second, it reduces the incremental value of cheap-talk advertising. We find that, in equilibrium, whether or not the advertising is consistent with a credible product review is informative about product quality. The results also imply that an overly informative product review can reduce the total information available to customers by deterring the firm from providing informative advertising.

Original language	English
Pages (from-to)	262-278
Number of pages	17
Journal	Production and Operations Management
Volume	34
Issue number	2
DOIs	https://doi.org/10.1177/10591478241279987
Publication status	E-pub ahead of print - 25 Aug 2024

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Publisher Copyright: © The Author(s) 2024.

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title = "On the Interaction Between Cheap-Talk Advertising and Credible Product Reviews",

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On the Interaction Between Cheap-Talk Advertising and Credible Product Reviews

Abstract

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