Risk aversion and apparently persuasive advertising

Risk aversion and apparently persuasive advertising

by Bharat Narendra Anand

Part of Working paper / Division of Research, Harvard Business School -- 02-099

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Previous empirical studies demonstrated that exposure to advertisements increases a consumers' tendency to buy the promoted product. Thestandard interpretation of this empirical regularity is that advertising intensity is an element of the utility. Here we show that if consumers are risk-averse and advertising conveys information about product attributes, the empirical regularity can be explained even without assuming that utility is a function of ad intensity.

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