I analyze the implication of consumers' limited attention to quality differences on market outcomes and welfare. I model this limited attention to quality differences with a perception threshold: Consumers only perceive quality differences between goods that exceed the consumers' perception...

There is widespread evidence that some firms use false advertising to overstate the value of their products. Using a model in which a policymaker is able to punish such false claims, we characterize a natural equilibrium in which false advertising actively influences rational buyers. We analyze...