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The Limits of Transparency: Pitfalls and Potential of Disclosing Conflicts of Interest

Author Info

Listed author(s):
  • George Loewenstein
  • Daylian M. Cain
  • Sunita Sah

Abstract

We review evidence from our published and ongoing research that disclosing conflicts of interest has unintended consequences, helping conflicted advisors and harming their advisees: With disclosure, advisors feel comfortable giving more biased advice, but advisees do not properly adjust for this and generally fail to sufficiently discount biased advice. Disclosure also increases pressure on advisees to comply with advice; following disclosure, advisees feel more uncomfortable in turning down advice (e.g., it signals distrust of the advisor's motives). Finally, we examine the effectiveness of policy interventions aimed at reducing these unintended consequences and discuss how to realize potential benefits of disclosure.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.101.3.423
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 101 (2011)
Issue (Month): 3 (May)
Pages: 423-428

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Handle: RePEc:aea:aecrev:v:101:y:2011:i:3:p:423-28
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  1. 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, Oxford University Press, vol. 37(5), pages 836-857.
  2. Koch, Christopher & Schmidt, Carsten, 2006. "Disclosing Conflict of Interest - Does Experience and Reputation Matter?," Sonderforschungsbereich 504 Publications 06-10, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
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Cited by:

  1. Yip, Jeremy A. & Schweitzer, Maurice E., 2016. "Mad and misleading: Incidental anger promotes deception," Organizational Behavior and Human Decision Processes, Elsevier, vol. 137(C), pages 207-217.
  2. Bazerman, Max H. & Sezer, Ovul, 2016. "Bounded awareness: Implications for ethical decision making," Organizational Behavior and Human Decision Processes, Elsevier, vol. 136(C), pages 95-105.
  3. Mario García Molina & Liliana Chicaíza Becerra, 2013. "Las decisiones de los economistas: Coase y los sesgos cognitivos en el trabajo teórico," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 15(29), pages 21-39, July-Dece.
  4. Chen, D.L. & Levonyan, V. & Reinhart, S.E. & Taksler, G., 2014. "Do Payment Disclosure Laws Affect Industry-Physician Relationships?," Health, Econometrics and Data Group (HEDG) Working Papers 14/24, HEDG, c/o Department of Economics, University of York.
  5. Houser, Daniel & Levy, David M. & Padgitt, Kail & Peart, Sandra J. & Xiao, Erte, 2014. "Raising the price of talk: An experimental analysis of transparent leadership," Journal of Economic Behavior & Organization, Elsevier, vol. 105(C), pages 208-218.
  6. Pan, Xiaofei & Xiao, Erte, 2016. "It’s not just the thought that counts: An experimental study on the hidden cost of giving," Journal of Public Economics, Elsevier, vol. 138(C), pages 22-31.
  7. Mariya Teteryatnikova & James Tremewan, 2016. "An offer you can refuse: the effects of transparency with endogenous conflict of interest," Vienna Economics Papers 1602, University of Vienna, Department of Economics.

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