The managers at Skechers U.S.A., Inc., thought they had a winning advertising campaign: Just walk around in

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The managers at Skechers U.S.A., Inc., thought they had a winning advertising campaign:

Just walk around in Skechers Shape-Up shoes to strengthen your leg and abdominal muscles and lose weight. Kim Kardashian starred in a Super Bowl advertisement making these claims. Another television ad featured a chiropractor discussing a study that supposedly verified the claims. Although it all might have seemed too good to be true, the managers at Skechers may not have cared because sales of the $60 to

$100 shoes rose to over $1 billion. The FTC wasn’t so quick to buy in, however: Aside from the chiropractor’s assertions, there was little to no scientific evidence supporting the claims. Further investigation revealed that Skechers paid the chiropractor for his endorsement—and he was married to a Skechers marketing executive.

a. Based on the advertised characteristics, are the Shape-Up shoes an inspection good, an experience good, or a credence good? Explain your answer.

b. Is it possible for false advertising to boost the demand for Shape-Up shoes? Why or why not?

c. If the FTC decides the advertisements are false, what sanctions can it impose?

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