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When Sunlight Fails to Disinfect: Understanding the Perverse Effects of Disclosing Conflicts of Interest

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Author Info

  • Daylian M. Cain
  • George Loewenstein
  • Don A. Moore

Abstract

Disclosure 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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File URL: http://www.jstor.org/stable/pdfplus/10.1086/656252
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File URL: http://www.jstor.org/stable/full/10.1086/656252
Download Restriction: Access to the online full text or PDF requires a subscription.

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Bibliographic Info

Article 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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Handle: RePEc:ucp:jconrs:doi:10.1086/656252

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Web page: http://www.journals.uchicago.edu/JCR/

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Cited by:
  1. Beyer, Max & de Meza, David & Reyniers, Diane, 2013. "Do financial advisor commissions distort client choice?," Economics Letters, Elsevier, vol. 119(2), pages 117-119.
  2. 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.
  3. 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).
  4. 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.
  5. 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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