Template-Type: ReDIF-Paper 1.0 Author-Name: Salvatore Piccolo Author-X-Name-First: Salvatore Author-X-Name-Last: Piccolo Author-Email: salvatore.piccolo@unicatt.it Author-Workplace-Name: Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore Author-Name: Piero Tedeschi Author-X-Name-First: Piero Author-X-Name-Last: Tedeschi Author-Email: piero.tedeschi@unicatt.it Author-Workplace-Name: Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore Author-Name: Giovanni Ursino Author-X-Name-First: Giovanni Author-X-Name-Last: Ursino Author-Email: giovanni.ursino@unicatt.it Author-Workplace-Name: Università Cattolica del Sacro Cuore Author-Workplace-Name: Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore Title: How Limiting Deceptive Practices Harms Consumers Abstract: There are two competing sellers of an experience good, one o ers high quality, one low. The low-quality seller can engage in deceptive advertising, potentially fooling a buyer into thinking the product is better than it is. Although deceptive advertising might seem to harm the buyer, we show that he could be better off when the low-quality seller can engage in deceptive advertising than not. We characterize the optimal deterrence rule that a regulatory agency seeking to punish deceptive practices should adopt. We show that greater protection against deceptive practices does not necessarily improve the buyer-welfare. Length: 21 Creation-Date: 2015-05 File-URL: http://dipartimenti.unicatt.it/economia-finanza-def023.pdf File-Format: Application/pdf File-Function: First version, 2015 Number: def023 Classification-JEL: L13, L15, L4. Keywords: Misleading Advertising, Deception, Bayesian Consumers, Asymmetric Information Handle: RePEc:ctc:serie1:def023