Celebrity Scandal and Consumer Loyalty

It’s hard to know whether the benefits of hiring a celebrity are worth the risk. We dig into one gruesome story of an endorsement gone wrong, and find a surprising result.

• SOURCES:
  • John Cawley, professor of economics at Cornell University.
  • Elizabeth (Zab) Johnson, executive director and senior fellow with the Wharton Neuroscience Initiative at the University of Pennsylvania.
  • Alvin Roth, professor of economics at Stanford University.

• RESOURCES:
  • "Kanye and Adidas: Money, Misconduct and the Price of Appeasement," by Megan Twohey (The New York Times, 2023).
  • "The Role of Repugnance in Markets: How the Jared Fogle Scandal Affected Patronage of Subway," by John Cawley, Julia Eddelbuettel, Scott Cunningham, Matthew D. Eisenberg, Alan D. Mathios, and Rosemary J. Avery (NBER Working Paper, 2023).
  • "How Celebrity Status and Gaze Direction in Ads Drive Visual Attention to Shape Consumer Decisions," by Simone D'Ambrogio, Noah Werksman, Michael L. Platt, and Elizabeth Johnson (Psychology & Marketing, 2022).
  • "Consumer Responses to Firms’ Voluntary Disclosure of Information: Evidence from Calorie Labeling by Starbucks," by Rosemary Avery, John Cawley, Julia Eddelbuettel, Matthew D. Eisenberg, Charlie Mann, and Alan D. Mathios (NBER Working Paper, 2021).
  • "Consumer Heterogeneity and Paid Search Effectiveness: A Large Scale Field Experiment," by Thomas Blake, Chris Nosko, and Steven Tadelis (NBER Working Paper, 2014).
  • "The Economics of Obesity," by John Cawley (The Reporter, 2013).
  • "Repugnance as a Constraint on Markets," by Alvin Roth (Journal of Economic Perspectives, 2007).

• EXTRAS:
  • "Does Advertising Actually Work? (Part 2: Digital)," by Freakonomics Radio (2020).
  • "Does Advertising Actually Work? (Part 1: TV)," by Freakonomics Radio (2020).