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How Do Restrictions on Advertising Affect Consumer Search?

Author

Listed:
  • Lesley Chiou

    (Economics Department, Occidental College, Los Angeles, California 90041)

  • Catherine E. Tucker

    (MIT Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02142)

Abstract

Advertising is often criticized for presenting only partial or selective information about products. This criticism is particularly pronounced for health products, where large asymmetries in information may exist between consumers and firms. This paper explores how government restrictions designed to prevent selective advertising affect the types of information to which consumers are exposed. We exploit a natural experiment in the form of a U.S. Food and Drug Administration (FDA) crackdown that prevented pharmaceutical companies from using selectively chosen information in their Internet search ads. Because companies could not adequately document side effects within the advertising space allowed, they removed their ads. Our results suggest that, after the ads were removed, consumers were more likely to seek information from websites based on user-generated content or websites that focused on medical treatments not regulated by the FDA, such as Canadian pharmacies and sites promoting herbal remedies.

Suggested Citation

  • Lesley Chiou & Catherine E. Tucker, 2022. "How Do Restrictions on Advertising Affect Consumer Search?," Management Science, INFORMS, vol. 68(2), pages 866-882, February.
    • Handle: RePEc:inm:ormnsc:v:68:y:2022:i:2:p:866-882
    DOI: 10.1287/mnsc.2021.3980
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    References listed on IDEAS

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