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

  • Anastasia Danilov

    (University of Cologne)

  • Torsten Biemann

    (University of Cologne)

  • Thorn Kring

    (Steinbeis University of Berlin)

  • Dirk Sliwka

    (University of Cologne)

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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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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  1. Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March.
  2. Inderst, Roman & Ottaviani, Marco, 2009. "Misselling through agents," IMFS Working Paper Series 36, Institute for Monetary and Financial Stability (IMFS), Goethe University Frankfurt.
  3. Bengt Holmstrom, 1981. "Moral Hazard in Teams," Discussion Papers 471, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. C. Bram Cadsby & Fei Song & Francis Tapon, 2008. "Are You Paying Your Employees to Cheat? An Experimental Investigation," Working Papers 0810, University of Guelph, Department of Economics and Finance.
  5. 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.
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  8. 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).
  9. 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.
  10. 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.
  11. 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.
  12. 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.
  13. 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.
  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. 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.
  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. 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.
  18. Conrads, Julian & Irlenbusch, Bernd & Rilke, Rainer Michael & Walkowitz, Gari, 2013. "Lying and team incentives," Journal of Economic Psychology, Elsevier, vol. 34(C), pages 1-7.
  19. 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.
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