When Sunlight Fails to Disinfect: Understanding the Perverse Effects of Disclosing Conflicts of Interest
AbstractDisclosure is often proposed as a remedy for conflicts of interest, but it can backfire, hurting those whom it is intended to protect. Building on our prior research, we introduce a conceptual model of disclosure’s effects on advisors and advice recipients that helps to explain when and why it backfires. Studies 1 and 2 examine psychological mechanisms (strategic exaggeration, moral licensing) by which disclosure can lead advisors to give more-biased advice. Study 3 shows that disclosure backfires when advice recipients who receive disclosure fail to sufficiently discount and thus fail to mitigate the adverse effects of disclosure on advisor bias. Study 4 identifies one remedy for inadequate discounting of biased advice: explicitly and simultaneously contrasting biased advice with unbiased advice.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Consumer Research.
Volume (Year): 37 (2011)
Issue (Month): 5 ()
Pages: 836 - 857
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Web page: http://www.journals.uchicago.edu/JCR/
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- Sascha Behnk & Iván Barreda-Tarrazona & Aurora García-Gallego, 2012. "Reducing deception through subsequent transparency - An experimental investigation," Working Papers 2012/14, Economics Department, Universitat Jaume I, Castellón (Spain).
- Beyer, Max & de Meza, David & Reyniers, Diane, 2013. "Do financial advisor commissions distort client choice?," Economics Letters, Elsevier, vol. 119(2), pages 117-119.
- Ismayilov, Huseyn & Potters, Jan, 2013. "Disclosing advisor's interests neither hurts nor helps," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 314-320.
- Anastasia Danilov & Torsten Biemann & Thorn Kring & Dirk Sliwka, 2012.
"The dark side of team incentives: Experimental evidence on advice quality from financial service professionals,"
Cologne Graduate School Working Paper Series
03-13, Cologne Graduate School in Management, Economics and Social Sciences, revised 18 Dec 2012.
- Danilov, Anastasia & Biemann, Torsten & Kring, Thorn & Sliwka, Dirk, 2013. "The dark side of team incentives: Experimental evidence on advice quality from financial service professionals," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 266-272.
- 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 423-28, May.
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