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The dark side of team incentives: Experimental evidence on advice quality from financial service professionals

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Author Info

  • Anastasia Danilov

    (University of Cologne)

  • Torsten Biemann

    (University of Cologne)

  • Thorn Kring

    (Steinbeis University of Berlin)

  • Dirk Sliwka

    (University of Cologne)

Abstract

In an experiment with professionals from the financial services sector, we investigate the impact of a team incentive scheme on recommendation quality of investment products when advisors benefit from advising lower quality products. Experimental results reveal that, when group affiliation is strong, worse products are recommended significantly more often under team incentives than under individual incentives.

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File URL: http://www.cgs.uni-koeln.de/fileadmin/wiso_fak/cgs/pdf/working_paper/cgswp_03-13.pdf
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File URL: http://www.cgs.uni-koeln.de/fileadmin/wiso_fak/cgs/pdf/working_paper/cgswp_03-13-rev.pdf
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Bibliographic Info

Paper provided by Cologne Graduate School in Management, Economics and Social Sciences in its series Cologne Graduate School Working Paper Series with number 03-13.

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Date of creation: 15 Oct 2012
Date of revision: 18 Dec 2012
Handle: RePEc:cgr:cgsser:03-13

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Keywords: deception; team incentives; professionals; financial advice; experiment;

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References

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  1. 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.
  2. Conrads, Julian & Irlenbusch, Bernd & Rilke, Rainer Michael & Walkowitz, Gari, 2011. "Lying and Team Incentives," IZA Discussion Papers 5968, Institute for the Study of Labor (IZA).
  3. Vera Popva, 2010. "What renders financial advisors less treacherous? - On commissions and reciprocity -," Jena Economic Research Papers 2010-036, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  4. 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, University of Chicago Press, vol. 37(5), pages 836 - 857.
  5. Francesca Gino & Lamar Pierce, 2010. "Lying to Level the Playing Field: Why People May Dishonestly Help or Hurt Others to Create Equity," Journal of Business Ethics, Springer, vol. 95(1), pages 89-103, September.
  6. Matthias Sutter, 2007. "Deception through telling the truth?! Experimental evidence from individuals and teams," Working Papers 2007-26, Faculty of Economics and Statistics, University of Innsbruck.
  7. Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March.
  8. Wiltermuth, Scott S., 2011. "Cheating more when the spoils are split," Organizational Behavior and Human Decision Processes, Elsevier, vol. 115(2), pages 157-168, July.
  9. Rajna Gibson & Carmen Tanner & Alexander F. Wagner, 2013. "Preferences for Truthfulness: Heterogeneity among and within Individuals," American Economic Review, American Economic Association, vol. 103(1), pages 532-48, February.
  10. Roman Inderst & Marco Ottaviani, 2009. "Misselling through Agents," American Economic Review, American Economic Association, vol. 99(3), pages 883-908, June.
  11. Carpenter, Jeffrey P. & Burks, Stephen V. & Verhoogen, Eric, 2004. "Comparing Students to Workers: The Effects of Social Framing on Behavior in Distribution Games," IZA Discussion Papers 1341, Institute for the Study of Labor (IZA).
  12. Denis, David J. & Hanouna, Paul & Sarin, Atulya, 2006. "Is there a dark side to incentive compensation?," Journal of Corporate Finance, Elsevier, vol. 12(3), pages 467-488, June.
  13. Bengt Holmstrom, 1981. "Moral Hazard in Teams," Discussion Papers 471, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  14. Vera Angelova & Tobias Regner, 2012. "Do voluntary payments to advisors improve the quality of financial advice? An experimental sender-receiver game," Jena Economic Research Papers 2012-011, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  15. Cadsby C. Bram & Song Fei & Tapon Francis, 2010. "Are You Paying Your Employees to Cheat? An Experimental Investigation," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-32, April.
  16. Gneezy, Uri & Rockenbach, Bettina & Serra-Garcia, Marta, 2013. "Measuring lying aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 293-300.
  17. 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, 01.
  18. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
  19. Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
  20. Inderst, Roman & Ottaviani, Marco, 2009. "Misselling through agents," IMFS Working Paper Series 36, Institute for Monetary and Financial Stability (IMFS), Goethe University Frankfurt.
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Citations

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Cited by:
  1. Angelova, Vera & Regner, Tobias, 2013. "Do voluntary payments to advisors improve the quality of financial advice? An experimental deception game," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 205-218.
  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. Erat, Sanjiv, 2013. "Avoiding lying: The case of delegated deception," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 273-278.
  4. Gneezy, Uri & Rockenbach, Bettina & Serra-Garcia, Marta, 2013. "Measuring lying aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 293-300.

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