Debunking Misinformation in Advertising

Abstract

The prevalence of misinformation in advertising has spurred various interested parties – regulators, the media and competing firms - to debunk false claims in the marketplace. This paper studies whether such debunking messages provided by these parties can reduce the impact of misinformation on consumer purchase behavior. If so, does debunking effectively change consumers' misbeliefs - an ideal outcome from a policy-maker's perspective - or does it merely reinforce correct beliefs, as predicted by biased Bayesian updating? With theory providing contradictory predictions, we design and implement a conjoint experiment that enables us to measure willingness-to-pay under exposure to real-world misinformation and debunking messages. Focusing on three ingredients in product categories where misinformation is prevalent (aluminum in deodorants, fluoride in toothpastes, and GMOs in food), we find that debunking plays an important role in mitigating the impact of misinformation. Debunking can repair the decrease in willingness-to-pay caused by misinformation by correcting misinformed beliefs, a promising finding for policymakers aiming to correct such misbeliefs in the marketplace. We discuss the incentives for firms to debunk or introduce new products that conform to misinformation.

Keywords: debunking, misinformation, deceptive advertising, social media, beliefs, conjoint, policy

JEL Classification: M31, M37, M38, L1, L15, I18, D83,D84