Rather bait than switch: deceptive advertising with bounded consumer rationality

Article Abstract:

The theoretical incentives and disincentives for companies to engage in fraudulent marketing practices are defined and examined. Such practices directly conflict with the role of advertising as a provider of information to help consumers make the most optimal decisions. A model of advertising and consumer reactions is presented, in which full rationality on the part of the consumer is shown to be costly to the consumer. This results in a form of bounded rationality that comes to govern consumer choice. It is further shown that firms will, in fact, advertise deceptively. Such practices cause a net loss in social welfare.

Advertising agencies, Economic aspects, False advertising

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Which tax rate do people use: average or marginal?

Article Abstract:

Controlled studies were conducted to determine the tax rate employed by people to facilitate marginal economic decision making. Results revealed that the number of people using the true marginal tax rate almost equals the number of those who misperceive the average tax rate to be the marginal rate. Results show that this misperception can be attributed to the way the tax table is presented. Evidence shows, however, that this 'mistake' is beneficial, since it causes excess burden to drop by 43% and helps increase labor supply by 5%.

Tax administration and procedure, Tax administration

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Price competition when consumer behavior is characterized by conformity or vanity

Article Abstract:

Research is presented describing the study of consumer behaviour on price mechanisms where products or services are purchased as a direct result of pressure or conformity.

Competition (Economics), Influence (Psychology)

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