Wednesday, April 09, 2008

In defense of false ads

There have been numerous complaints by cellphone users about misleading advertisements. Service providers are racing to attract consumers in a Bertrand price war, using advertisements as attractor. Some ads are extremely dumb.

Should the government take any action on this?

No. Banning false advertising only reflects the belief that the average people, consumer, is stupid. It is as if, as Stigler said, individual consumer can in no way detect fraudulent claims and promises. So he has to be protected from his own incompetence. That's nonsense.