Baby, I Can See Your Halo : How the Halo Effect, Loss Aversion, and Strategic Attribute Disclosure Neglect Can Inform Negative Advertising

Abstract

This paper analyzes how the halo effect, loss aversion, and neglect of the strategic nature of information revelation are present in consumer’s sequential learning and belief updating about the quality of products. The implications of these biases are analyzed to determine the circumstances under which producers will optimally engage in negative advertising. A theoretical model is developed and tested using an experiment conducted on Prolific Academic using data from Consumer Reports.