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.

Comments

[Andrew]

First of all, I do not think any business wants consumers to focus on any aspect of its services that can be measured quantitativly unless it is very sure that it can maintain its advantadge. For example, if an airline drew a lot of attention to its punctuality by providing detailed statistics, then later it had a "less punctual" period, it would have a difficult time explaining why it would no longer be calling peoples' attention to its detailed statisitcs. (And, for some reason I don't entirely understand, no corporation is ever allowed to admit to having ever made any kind of mistake.)

Another possible reason is the threat of litigation. My aunt works in advertising, and she says her company's legal department is always trying to get them to avoid making specific claims because a competitor will dispute it and sue them.

[John Campbell]

It is outlandish to think the new facebook advertising platform is going to perform better than Google Adwords. Facebook's current platform produces about $.10 per 1000 impressions. Google earns $20+ per 1000 searches in the US. Targeting a user profile (Facebook) will always be an order of magnitude worse than targeting what the user is looking for at that instant (Google).

[Daniel Griffin]

Re: John Campbell

I think that aside about Facebook is rooted in the idea that Facebook, with a great many number of useful data points, will be better able to "pinpoint ads to particular tastes of the viewer" than Google's system of relying primarily on search terms (and this doesn't suppose Facebook will have a better system for monetization or to suit the marketer, but perhaps for the user).

Facebook has person-specific and easily manipulatable data that is relevant to a great deal of potential advertising and so might provide data more useful to the user, than might be possible from compilations of search terms.

There is no necessary connection between his aside and any idea that Facebook's plan will surpass Google in terms of revenue generation.
That being said, I think one might hedge the use of "always" and surmise that it is possible that Facebook could leverage, in marketing their ad-system to-their-users, the fact that they have so many data points on each user, on average, in a great many areas and so will provide great product suggestions and so on.
Of course, we all trust Google, and know that Google will do no evil, and so Google could offer an opt-in system of the same sort, requesting data points that the user knows will be used explicitly for this. Why they haven't done this already is not apparent, seeing how freely people provide information on the web.

[ChinaCoalWatcher]

I think some of the mystery can be resolved if one realizes that mass-advertising, just like political advertising, is only targeted towards a small slice of the audience.

In political campaigns, ads are only expected to have swaying or persuasive power on a small fraction of undecided centrists. Of course, motivating a small number of non-voters to go to the polls, or getting even a few percent of marginal voters to switch sides, can win elections in these 50-50 days.

With mass advertising, businesses create ads that target the portion of consumers that are susceptible and suggestible to advertising in the first place. There's no way to be certain, but I suspect that this portion is a small fraction.

When I buy airline tickets, my decision is advertising-insensitive (or so I like to think). I use the price-aggregator websites, like expedia, orbitz, and kayak to find the best deal, and then see if certain "upgrades" (like flying non-stop or business class) in my experience are worth the premiums.

One of those upgrades is the airline itself, since experiences with delays, overbooking, stress-level of employees, frills, seat-space, etc... tend to vary greatly across the industry. Based on my personal experience, and the word-of-mouth reporting of others - I can generally guess accurately how good or bad my experience will be.

That decision-making process seems almost universal among those to whom I've spoken about it. When viewing airline advertisements, they not only seem ridiculous to me personally, but it's hard for me to understand how they would work on anyone at all in this internet era. If one assumes that the kind of "airline-brand suggestible" people tend to have lower-incomes, then they would tend to be even more price-sensitive and less brand-loyal than others and the ad effect would wear off when they got to the point of booking.

It would be irrational for any airline to advertise if they didn't believe that doing so would produce enough extra business profit to more than compensate for the price of the ads. Absent some strong (but very hard to assess) evidence from their marketing firms, perhaps the airline executives are simply being irrational and relying on an old technique that no longer works.

[Jack]

Posner's choice of topic seems more of a lament about the what's happening to the airline industry than one about false or misleading advertising. Much of the problem is that of a system striving to operate at maximum capacity coupled with an inability to cooperate with its competitors in a way that would seemingly improve service and lower overall costs.

Remember the days before "dereg" when Green was delayed and they just sent you down the row with a voucher to take an empty seat on Red or Orange? It would seem that today with the quest for maxxing seat miles that such a cooperative system would return.

Today, as "China's" comment on using Expedia indicates flying has largely become a generic commodity and one in which leisure travel is extremely price sensitive, so the fundamentals would point to beating down prices below the cost of operation and providing even lower standards of service. Trying to take a price increase to cover the soaring fuel prices will likely make things worse.

I suspect the situation is ripe for the current "air buses" for most of us while elite airlines develop for the business traveler with tight schedules to meet, except that popular airports don't have the capacity for them.

China, good comments on political advertising. Advertising air travel or most other products the ad budget is self-limiting as management finds that a bigger budget is not justified in terms of units sold.

Political advertising is very different in that the value of that last vote needed to win is worth the entire campaign or more and the reason that current naive attempts to fiddle with campaign reform at the margins is futile; the money is the mechanism and "serious" candidates must get it, one way or another.

[ben]

No Jack. Its about advertising. Idiot.

[Michael Martin]

Whether Facebook's ad network will result in better conversion ratios than Google's Ad Sense is still an open question. Search text is still the most immediate and direct information about what a consumer wants. But there is no question that user profile information will improve conversion ratios by improving demographic targeting -- especially when in the context of a particular activity.

In a very abstract sense ad targeting is a little like interpreting texts. As Judge Posner makes the point in one of my favorite books of his, The Problematics of Jurisprudence, a text by itself can mean many different things. The purpose of the interpreter is very important in determing "literal" meaning.

[Richard Mason]

I think it is almost always a mistake to mention one's competitor in advertising.

It increases simple awareness of the competitor's brand.

It suggests that the competitor is an important peer company and worthy of consideration.

There is the danger that the viewer will forget which of the two brands mentioned was supposedly the superior one.

There is the danger that the viewer will find the comparison overstated or mean-spirited, and feel sympathy for the denigrated competing brand.

As with negative political advertising, some viewers may think worse of both the mud-slinger and the mud-slingee, and seek out a third alternative.

[iNonymous]

I think Judge Posner makes a possibly unwarranted assumption; that is, that the sole message of airline advertising is "Fly Airline X instead of Airline Y." I believe that a large portion of airline advertising is simply saying "Fly."

If an airline talks about its competitors delays, consumers won't think "I won't fly Airline Y because it has delays," they will think "I won't fly because airlines have delays." They'll drive instead, or in the Northeast take the Amtrak, or maybe even stay home. In short, there are a wide variety of substitute goods for air travel, and airlines are probably more afraid of these goods than of their competitor airlines.

No airline wants to run an ad that will give it a bigger piece of the pie, but at the same time cause the pie itself to shrink.

[Speed]

"Some cars were safer than others and why didn't the manufacturers of those cars advertise their safety features."
Volvo started promoting their safety advantages decades ago. Competitors eventually emphasized safety in their products and promotion.

[ChinaCoalWatcher]

I think iNonymous has a keen insight. If public perception of air travel is negative, then airline advertising may be less geared towards inspiring brand purchases than inspiring flying in general - with the hope that by convincing people to fly instead of drive, an advertising airline will get a similarly proportional slice of a larger pie.

If it were an industry-wide promotional issue, then one might except an industry-wide campaign, "Try flying again, it's not as bad as you think! Yes, really! Brought to you by the Better Airlines Association." Something like other brand-insensitive-purchase campaigns; "Beef, it's what's for dinner" or "Pork, the other white meat" or "Milk, it does a body good"

In this manner, airlines could pool their resources and probably achieve better bulk advertising rates and therefore a higher return to marketing investment ratio. But, like other game situations - there would be uncertainty as to who would benefit most from this pooling. If the campaign produces more no-frills passengers, then high-frills airlines would drop out. Airlines might also doubt whether their return was proportional to their contribution. And if airlines elect not to cooperate, they have the chance for full control over the style of advertising over which they can blast their own brand exclusively.

So, if Airline advertising is really trying to get more people to fly in general, then ridiculous efforts to promote a particular brand in those ads are perhaps the result of disputes over risk, return, and control. In other words, the uncooperative (and potentially wasteful) behavior in the market game of air travel.

[neilehat]

Just an air traveler observation, I used to fly just about everywhere on business and personal trips and it was an enjoyable way to travel. Now with the anti-terrorist security systems in place, cattle car mentality of the airlines, and a slew of other issues, if the distance traveled is under five hundred miles I'll drive it.

It has nothing to do with advertising, it's just so much simpler and hassle free. Ahh ..., the joys of deregulation!

[Danny L. McDaniel]

Politics learned "spin" from advertizers. It is the difference between using the words less or fewer. They don't mean the same and taken out of proper contexts are incorrecvt and misleading.

[xue]

hello Prof. Posner:
after reading this essay, I got some words to help me understand what had u said. do u think that I get the point?
-->
People received information filtered by them already. So much more information had stored in people’s brains and was classified by people’s own judgments before. Only the good things were easy to recall and remind. In fact, the things people consumed or used merely in its good aspects. People usually would make use of things good, and therefore did not be misled by information false or incomplete.

[LemmusLemmus]

Do companies actually know their competitions delay times?

[Anonymous]

The estate tax make no sense at all. The person has to pay taxes all his life and on the top of that to pay taxes when is dead.

[Wes]

In my view, creating an open market for airline tickets would solve many of the problems of the airline industry. As it is, a person can go online to a site like E*Trade and buy and sell stock. What if a person could go to a site like Expedia and not only buy and but also sell airline tickets?This would have a number of benefits. First, it would shift passenger focus away from price to other aspects of the service (such as on-time arrivals). This would happen because passengers would no longer be worried that the airline had (unfairly) charged them $400 for the same ticket that someone else had only paid $200 for.Second, an open market for airline tickets would allow airlines to more accurately gauge demand. As it is now, most flights are either half full or crammed full (over-booked). An open market would allow airlines to arrange their flights to accurately meet demand.

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