Working Paper: NBER ID: w11838
Authors: Sendhil Mullainathan; Andrei Shleifer
Abstract: Persuasion is a fundamental part of social activity, yet it is rarely studied by economists. We compare the traditional economic model, in which persuasion is communication of objectively valuable information, with a behavioral model, in which persuasion is an effort to fit the message into the audience's already held beliefs. We present a simple formalization of the behavioral model, and compare the two models using data on financial advertising in Money and Business Week magazines over the course of the internet bubble. The evidence on the content of the persuasive messages is broadly consistent with the behavioral model of persuasion.
Keywords: persuasion; finance; advertising; behavioral economics
JEL Codes: G11; G14; M3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Market conditions (stock prices) (G19) | Advertising content (M37) |
| Stock prices rising (G19) | Emphasis on growth in advertisements (M37) |
| Stock prices falling (G19) | Emphasis on protection in advertisements (D18) |
| Investor beliefs (G40) | Advertising strategies (M38) |
| Past market returns (G17) | Advertising content (M37) |