Lessons From an Oops at Consumer Reports®: Consumers Follow Experts; Ignore Invalid Information

Abstract:     

In 2007 Consumer Reports released, and two weeks later retracted, a flawed report on the safety of infant carseats. Analyzing data from 5,471 online auctions for carseats ending before, during and after the information was considered valid I find that (1) consumers responded to the new information, and –more interestingly- that (2) they promptly ceased to do so once it was retracted. This first finding, thanks to the random nature of the flawed ratings, demonstrates that expert advice has a causal effect on consumer demand. The second finding suggests that people’s inability to willfully ignore information is not as extreme as the experimental evidence in the psychological literature would suggest.

Number of Pages in PDF File: 34

Keywords: Behavioral Economics, maketplace, consumer behavior, heuristics and biases, hindsight bias, curse of knowledge