Why Do People Pay for Useless Advice? Implications of Gambler's and Hot-Hand Fallacies in False-Expert Setting
AbstractWe investigated experimentally whether people can be induced to believe in a non-existent expert, and subsequently pay for what can only be described as transparently useless advice about future chance events. Consistent with the theoretical predictions made by Rabin (2002) and Rabin and Vayanos (2010), we show empirically that the answer is yes and that the size of the error made systematically by people is large.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6557.
Length: 26 pages
Date of creation: May 2012
Date of revision:
Publication status: forthcoming as 'Would You Pay for Transparently Useless Advice? A Test of Boundaries of Beliefs in the Folly of Predictions' in: Review of Economics and Statistics.
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Find related papers by JEL classification:
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-29 (All new papers)
- NEP-CBE-2012-05-29 (Cognitive & Behavioural Economics)
- NEP-SEA-2012-05-29 (South East Asia)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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"Inference by Believers in the Law of Small Numbers,"
Department of Economics, Working Paper Series
qt4sw8n41t, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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- Matthew Rabin, 2001. "Inference by Believers in the Law of Small Numbers," Method and Hist of Econ Thought 0012002, EconWPA.
- Matthew Rabin., 2000. "Inference by Believers in the Law of Small Numbers," Economics Working Papers E00-282, University of California at Berkeley.
- Jorgensen, C.B. & Suetens, S. & Tyran, J.R., 2011.
"Predicting Lotto Numbers,"
2011-033, Tilburg University, Center for Economic Research.
- Jørgensen, Claus Bjørn & Suetens, Sigrid & Tyran, Jean-Robert, 2011. "Predicting Lotto Numbers," CEPR Discussion Papers 8314, C.E.P.R. Discussion Papers.
- Claus Bjørn Jørgensen & Sigrid Suetens & Jean-Robert Tyran, 2011. "Predicting Lotto Numbers," Discussion Papers 11-10, University of Copenhagen. Department of Economics.
- Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-617, December.
- Jonathan Guryan & Melissa S. Kearney, 2008. "Gambling at Lucky Stores: Empirical Evidence from State Lottery Sales," American Economic Review, American Economic Association, vol. 98(1), pages 458-73, March.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- La Fuerte Demanda por Charlatanes
by Alejandro Villagomez in Tintero Económico Diario on 2012-05-28 00:14:00
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