Buying the Verdict

55 Pages Posted: 23 Apr 2018

See all articles by Lauren Cohen

Lauren Cohen

Harvard Business School; National Bureau of Economic Research (NBER)

Umit Gurun

University of Texas at Dallas

Multiple version iconThere are 2 versions of this paper

Date Written: April 2018

Abstract

We document evidence that firms systematically increase specialized, locally targeted advertising following the firm being taken to trial in that given location - precisely following initiation of the suit. In particular, we use legal actions brought against publicly traded firms over the 20 year sample period that progress to trial from 1995-2014. In terms of magnitude, the increase is sizable: targeted local advertising increases by 23% (t=4.39) following the suit. Moreover, firms concentrate these strategic increases in locations where the return on their advertising dollars are largest: in smaller, more concentrated advertising markets where fewer competitor firms are advertising. They focus their advertisement spikes specifically toward jury trials, and in fact specifically toward the most likely jury pool. Lastly, we document that these advertising spikes are associated with verdicts, increasing the probability of a favorable outcome.

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Suggested Citation

Cohen, Lauren and Gurun, Umit, Buying the Verdict (April 2018). NBER Working Paper No. w24542. Available at SSRN: https://ssrn.com/abstract=3167056

Lauren Cohen (Contact Author)

Harvard Business School ( email )

Rock Center 321
Soldiers Field
Boston, MA 02163
United States

HOME PAGE: http://www.people.hbs.edu/lcohen

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Umit Gurun

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

HOME PAGE: http://www.umitgurun.com

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