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What renders financial advisors less treacherous? - On commissions and reciprocity -

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Author Info

  • Vera Popva

    ()
    (Max Planck Institute of Economics, Jena, Germany)

Abstract

An advisor is supposed to recommend a financial product in the best interest of her client. However, the best product for the client may not always be the product yielding the highest commission (paid by product providers) to the advisor. Do advisors nevertheless provide truthful advice? If not, will a voluntary or obligatory payment by a client induce more truthful advice? According to the results, only the voluntary payment reduces the conflict of interest faced by advisors.

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File URL: http://pubdb.wiwi.uni-jena.de/pdf/wp_2010_036.pdf
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Bibliographic Info

Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2010-036.

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Date of creation: 23 Jun 2010
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Handle: RePEc:jrp:jrpwrp:2010-036

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Keywords: financial advisors; moral hazard; reciprocity; experiments;

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References

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  1. Ernst Fehr & Simon Gachter & Georg Kirchsteiger, 1997. "Reciprocity as a Contract Enforcement Device: Experimental Evidence," Econometrica, Econometric Society, vol. 65(4), pages 833-860, July.
  2. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  3. Santiago Sánchez-Pagés & Marc Vorsatz, 2009. "Enjoy the silence: an experiment on truth-telling," Experimental Economics, Springer, vol. 12(2), pages 220-241, June.
  4. Bruno S. Frey & Reto Jegen, 2000. "Motivation Crowding Theory: A Survey of Empirical Evidence," CESifo Working Paper Series 245, CESifo Group Munich.
  5. Fehr, Ernst & Kirchsteiger, Georg & Riedl, Arno, 1995. "Gift Exchange and Reciprocity in Competitive Experimental Markets," Economics Series 14, Institute for Advanced Studies.
  6. Matthias Sutter, 2009. "Deception Through Telling the Truth?! Experimental Evidence From Individuals and Teams," Economic Journal, Royal Economic Society, vol. 119(534), pages 47-60, 01.
  7. Florian Artinger & Filippos Exadaktylos & Hannes Koppel & Lauri Sääksvuori, 2010. "Applying Quadratic Scoring Rule transparently in multiple choice settings: A note," Jena Economic Research Papers 2010-021, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  8. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
  9. Sjaak Hurkens & Navin Kartik, 2009. "Would I lie to you? On social preferences and lying aversion," Experimental Economics, Springer, vol. 12(2), pages 180-192, June.
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Citations

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Cited by:
  1. 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).
  2. 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.
  3. 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.
  4. 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.

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