a set of demand and parameter conditions where policy optimally permits a positive level of false advertising. Further …There is widespread evidence that some firms use false advertising to overstate the value of their products. Using a … advertising actively influences rational buyers. We analyze the effects of policy under different welfare objectives and establish …

inferences about a consumer's preferred product category and offer advertising firms the possibility to target their ads to match … the consumer's taste. Such targeting reduces overall advertising costs and, as a direct effect, increases industry profits …. However, as we show in this paper, when consumers form reference prices and are loss averse, more precise targeting may …