Why Is So Much Product Information False or Incomplete, Yet Not Misleading?--Posner
Here is a puzzle. With the recent deterioration of airline service, airlines' posted flight schedules have become uninformative. "On time" is defined as within 15 minutes of scheduled arrival, and a large percentage of flights are not "on time" even as so generously construed. Flights often are delayed by hours, and sometimes canceled, in which event the delay is the interval between the scheduled arrival of the canceled flight and the arrival of the later flight that one is booked on. A truthful airline schedule would list the mean length of a flight on a given route together with some indication of variance--perhaps the standard deviation, or what the media call the "margin of error," which is two standard deviations, from the mean. So why don't airlines publish accurate, informative schedules? Instead they have surreptitiously adjusted their schedules to enlarge scheduled flight times slightly in order to reduce measured delay.
Some airlines have better on-time arrival records than others. Why don't they publish accurate schedules, or at least advertise their better on-time record? The problem, it might seem, is that such disclosures have a two-edged quality. They draw the consumer's attention to the seller's own faults as well as to his competitors' faults. The disclosures say "I'm bad, but he's worse." But this is not an adequate explanation. Airline travelers know that airline schedules are grossly inaccurate. All they would learn from truthful comparative advertising would be which airlines' schedules are least inaccurate, and one might think that that would be both valuable information to consumers and effective advertising for the better airlines.
At the same time that sellers forgo much product disclosure that would seem advantageous both to them and to their customers, they make disclosures that have no information value and should not persuade any rational consumer, such as implausible, self-serving, and empty claims that their product is better, or super; and these claims are often wrapped in clever, funny pictures or anecdotes that are designed to seize the attention of the viewer, but that convey no information.
The purpose of the empty claims is easier to understand than the dearth of the type of negative comparative advertising that one might expected the better airlines to publish. The informationally empty claims convey to the reader the name of a product (so they are not really completely empty) and the sense that it must be a dependable product in some sense to be the subject of such classy advertising. It may be oversubtle to suggest as some economists have that media advertising signals a commitment to quality because if consumers are disappointed with the product the heavy investment that the seller made in advertising will be wiped out. It is enough that the glossy ads convey that this is a product that consumers ought to have in mind the next time they are shopping for that class of products, so that when they are scanning a shelf in a grocery store or drugstore or other retail outlet they will recall the brand name and give it a careful look before passing on to the next brand on the shelf. The brand name incidentally serves the important function of providing an assurance of at least approximately uniform quality, since that is required to enable the seller to retain trademark protection and thus prevent other sellers from selling their products under the same brand name.
But the reluctance of sellers to engage in the type of comparative advertising that would reveal shortcomings in the advertiser's product remains mysterious, since, as in the airline example, these shortcomings are usually quite well known to the persons at whom the advertising would be aimed. Automobile manufacturers were reluctant to install, let alone advertise, safety features such as seatbelts until the government required the installation of them and partly as a consequence of this consumers became safety conscious. But people always knew that automobile accidents were frequent and that tens of thousands of Americans were killed every year in such accidents. Some cars were safer than others and why didn't the manufacturers of those cars advertise their safety features? Why were auto manufacturers reluctant to open a new front, namely that of relative safety, in their competitive war with each other?
Evidently people have an aversion to being reminded of bad things that they know. To know something does not require that one be thinking about it. Everyone knows that he is going to die some day, and that that day may come very soon, but we do not like to dwell on such things. Advertisements for life insurance intimate mortality, of course, but very obliquely. They do not say: you had better buy our insurance today because tomorrow you could be dead from an aneurysm, a terrorist attack, or a broken neck from slipping on a banana peel. If you fly, you know about and dread long delays, but you do not want to be told: "our planes have never been stuck on runways because of thunderstorms for more than four hours, but X Airlines' plans have been stuck for as long as eight hours, with overflowing toilets, etc."
Then too there may be a sense that the part of such dismal comparative advertising that unavoidably disparages one's own product will be thought more credible than the part that disparages one's competitors' products. The former is in the nature of a confession, the latter of an accusation; and confessions are highly credible. The reader will know that all airlines experience delays, but if only one--the advertising airline--admits to this, it becomes associated in the reader's mind with delay.
The idea that products can pick up unwanted associations that are harmful, though it might seem from a strictly rational standpoint that they should not be, underlies the legal concept of trademark "dilution." Suppose you sell roasted chestnuts on a street corner in Manhattan and you call your stand "Rolls Royce." No one will think that the manufacturer of Rolls Royce is also engaged in the retail sale of nuts. So there would be no "passing off," in trademark jargon. But Rolls Royce could sue you for trademark dilution. (An alternative theory of such a suit would be that you are appropriating the aura that Rolls Royce has acquired as a result of the investment in quality by its manufacturer, and that aura should be treated as a property right of the manufacturer that you are infringing.) Because the next time a person is shopping for a luxury car, and trying to choose between a Rolls Royce and an Aston Martin, he may find himself involuntarily associating the Rolls with the nut stand.
An even clearer example is the legal concept of trademark "tarnishment," illustrated by a case in which a seller of T-shirts stenciled "I Like Cocaine" on them in the style of the Coca-Cola company's advertising slogan "I Like Coke." In rational-choice terms, we might try to explain the dilution and tarnishment cases by suggesting that the trade name or advertising alleged to infringe trademark creates a distracting mental association that requires a mental exertion to overcome, and thus imposes a cost on the trademark owner that may exceed the benefit to the alleged infringer.
I suspect that Internet advertising is more informative than media advertising, and that the gap will grow. The reason is that the Internet can pinpoint ads to particular tastes of the viewer (see the recent articles on Facebook's advertising plans, which will enable better matching than Google advertising) and thus give the viewer pertinent information. This is difficult with media advertising because the audience that reads or views the advertising is heterogeneous.