Why Do People Pay for Useless Advice?
We 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.
|Date of creation:||Jun 2012|
|Contact details of provider:|| Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP|
References listed on IDEAS
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- Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December.
- Matthew Rabin, 2002. "Inference by Believers in the Law of Small Numbers," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 775-816.
- Jørgensen, Claus Bjørn & Suetens, Sigrid & Tyran, Jean-Robert, 2011.
"Predicting Lotto Numbers,"
CEPR Discussion Papers
8314, C.E.P.R. Discussion Papers.
- Jorgensen, C.B. & Suetens, S. & Tyran, J.R., 2011. "Predicting Lotto Numbers," Discussion Paper 2011-033, Tilburg University, Center for Economic Research.
- Claus Bjørn Jørgensen & Sigrid Suetens & Jean-Robert Tyran, 2011. "Predicting Lotto Numbers," Discussion Papers 11-10, University of Copenhagen. Department of Economics.
- 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 458-473, March.
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
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