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Exploiting Advertising

29 Pages Posted: 24 Sep 2016 Last revised: 27 Sep 2016

Jim Hawkins

University of Houston Law Center

Date Written: September 23, 2016

Abstract

Advertising’s goal, we all know, is to cause people to spend more money. Often, it exploits bad decision-making to accomplish it. This Article hopes to turn the tables and offer a way for policymakers to exploit the information presented in advertisements to produce better regulations.

It makes the novel suggestion that legal researchers and policymakers should use advertising to diagnose behavioral market failures. I argue that advertisements reflect companies’ beliefs about how consumers make purchasing decisions. If advertising supplies information that a rational actor would value, then there is good evidence that the market is not experiencing a behavioral market failure. If, on the other hand, advertising only serves to exploit the systematic mistakes that consumers make persists in the market, then it is likely that the market is not functioning efficiently.

I use the reverse mortgage market as a case study to apply my approach. Drawing on recent empirical studies of reverse mortgage advertising, I show how rational choice theory cannot explain some features of the advertising. By exploiting the advertisements for reverse mortgages, policymakers can detect places reverse mortgage customers are likely making systematically poor decisions.

Keywords: reverse mortgages, behavioral economics, contract law

Suggested Citation

Hawkins, Jim, Exploiting Advertising (September 23, 2016). Law and Contemporary Problems, Forthcoming; U of Houston Law Center No. 2016-A-17. Available at SSRN: https://ssrn.com/abstract=2842809

Jim Hawkins (Contact Author)

University of Houston Law Center ( email )

4604 Calhoun Road
Houston, TX 77204-6060
United States

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