Why is advertising an effective signal of quality in an experience good?
A)Consumers are uninformed and need advertising to provide information
B)Advertising lists the qualities of a product
C)Consumers believe firms that can afford to heavily advertise sell quality products
D)Sellers can ignore low quality issues in their advertisements
E)Consumers believe advertising more than word of mouth information

Question

Quizplus · Accepted Answer

Consumers often believe that firms that can afford to heavily advertise sell quality products, as the cost of advertising is high. This can be an effective signal of quality in an experience good, where consumers cannot fully evaluate the quality of the product until they have used it.

Why Is Advertising an Effective Signal of Quality in an Experience