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The Limits of Transparency: Pitfalls and Potential of Disclosing Conflicts of Interest

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  • George Loewenstein
  • Daylian M. Cain
  • Sunita Sah

Abstract

We review evidence from our published and ongoing research that disclosing conflicts of interest has unintended consequences, helping conflicted advisors and harming their advisees: With disclosure, advisors feel comfortable giving more biased advice, but advisees do not properly adjust for this and generally fail to sufficiently discount biased advice. Disclosure also increases pressure on advisees to comply with advice; following disclosure, advisees feel more uncomfortable in turning down advice (e.g., it signals distrust of the advisor's motives). Finally, we examine the effectiveness of policy interventions aimed at reducing these unintended consequences and discuss how to realize potential benefits of disclosure.

Suggested Citation

  • George Loewenstein & Daylian M. Cain & Sunita Sah, 2011. "The Limits of Transparency: Pitfalls and Potential of Disclosing Conflicts of Interest," American Economic Review, American Economic Association, vol. 101(3), pages 423-428, May.
    • Handle: RePEc:aea:aecrev:v:101:y:2011:i:3:p:423-28
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.101.3.423
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    References listed on IDEAS

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    1. Daylian M. Cain & George Loewenstein & Don A. Moore, 2005. "The Dirt on Coming Clean: Perverse Effects of Disclosing Conflicts of Interest," The Journal of Legal Studies, University of Chicago Press, vol. 34(1), pages 1-25, January.
    2. Bero, Lisa A. Ph.D. & Glantz, Stanton & Hong, Mi-Kyung, 2005. "The Limits of Competing Interest Disclosures," University of California at San Francisco, Center for Tobacco Control Research and Education qt9170d63n, Center for Tobacco Control Research and Education, UC San Francisco.
    3. Daylian M. Cain & George Loewenstein & Don A. Moore, 2011. "When Sunlight Fails to Disinfect: Understanding the Perverse Effects of Disclosing Conflicts of Interest," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 37(5), pages 836-857.
    4. Koch, Christopher & Schmidt, Carsten, 2006. "Disclosing Conflict of Interest - Does Experience and Reputation Matter?," Sonderforschungsbereich 504 Publications 06-10, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
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