American Economic Journal:
Applied Economics
ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)
Does Cheap Talk Affect Market Outcomes? Evidence from eBay
American Economic Journal: Applied Economics
vol. 11,
no. 4, October 2019
(pp. 305–26)
Abstract
We study cheap talk by firms and responses by their consumers, focusing on unverifiable promises of charitable donations on eBay during 2005–2006. Cheap talk listings have lower sales probabilities but sell at higher prices when successful. The negative relationship between cheap talk and sales is concentrated in the months following Hurricane Katrina, a time when verifiable and unverifiable charity listings increased dramatically. Finally, we show that cheap talk sellers have lower quality ratings than those making verifiable donations. Our results suggest that buyers (justifiably) avoid cheap talk listings when credible quality signals are available, thus limiting the extent of cheap talk.Citation
Elfenbein, Daniel W., Raymond Fisman, and Brian McManus. 2019. "Does Cheap Talk Affect Market Outcomes? Evidence from eBay." American Economic Journal: Applied Economics, 11 (4): 305–26. DOI: 10.1257/app.20170086Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- D82 Asymmetric and Private Information; Mechanism Design
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- L15 Information and Product Quality; Standardization and Compatibility
- L31 Nonprofit Institutions; NGOs; Social Entrepreneurship
- M31 Marketing
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