Game Theory at Work(c) How to Use Game Theory to Outthink and Outmaneuver Your Competition

Why do some companies pay celebrities piles of money for product endorsements when the celebrities usually aren’t qualified to evaluate the products? Celebrity endorsements resemble flowers on Valentine’s Day: a costly method of signaling. Celebrities are expensive to rent. A company would be willing to spend lots of money only on a product it was devoted to. Consequently, a celebrity endorsement signals commitment.