Mechanisms for Enhancing the Credibility of an Adviser: Prepayment and Aligned Incentives
We tested the effectiveness of prepayment for advice and aligned incentives as mechanisms for enhancing trust in unfamiliar advisers in decision-making under uncertainty. Participants were low-income Zimbabweans who played two rounds of the Monty Hall three-door game. In round 1, participants who purchased advice were significantly more likely to follow advice for how to win the game than were participants who received free advice. In round 2, the apparent effectiveness of advisers’ suggestions in round 1 moderated participants’ propensity to follow advice. If the round 1 advice appeared wrong, the credibility enhancing benefits of prepayment diminished. If the advice appeared right, the benefits of prepayment maintained. Hypotheses with regard to the benefits of aligned incentives received only weak support.
|Date of creation:||Mar 2006|
|Date of revision:|
|Contact details of provider:|| Postal: 79 JFK Street, Cambridge, MA 02138|
Web page: http://www.ksg.harvard.edu/research/working_papers/index.htm
More information through EDIRC
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.:
- Friedman, Daniel, 1998. "Monty Hall's Three Doors: Construction and Deconstruction of a Choice Anomaly," American Economic Review, American Economic Association, vol. 88(4), pages 933-46, September.
- Richard H. Thaler & Eric J. Johnson, 1990. "Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice," Management Science, INFORMS, vol. 36(6), pages 643-660, June.
- Tilman Slembeck & Jean-Robert Tyran, 2002.
"Do Institutions Promote Rationality? An Experimental Study of the Three-Door Anomaly,"
University of St. Gallen Department of Economics working paper series 2002
2002-21, Department of Economics, University of St. Gallen.
- Slembeck, Tilman & Tyran, Jean-Robert, 2004. "Do institutions promote rationality?: An experimental study of the three-door anomaly," Journal of Economic Behavior & Organization, Elsevier, vol. 54(3), pages 337-350, July.
- Sniezek, Janet A. & Buckley, Timothy, 1995. "Cueing and Cognitive Conflict in Judge-Advisor Decision Making," Organizational Behavior and Human Decision Processes, Elsevier, vol. 62(2), pages 159-174, May.
- Kahneman, Daniel & Tversky, Amos, 1979.
"Prospect Theory: An Analysis of Decision under Risk,"
Econometric Society, vol. 47(2), pages 263-91, March.
- Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
- Patt, Anthony, 2001. "Understanding uncertainty: forecasting seasonal climate for farmers in Zimbabwe," Risk, Decision and Policy, Cambridge University Press, vol. 6(02), pages 105-119, June.
- Camerer, Colin F & Hogarth, Robin M, 1999.
"The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework,"
Journal of Risk and Uncertainty,
Springer, vol. 19(1-3), pages 7-42, December.
- Camerer, Colin F. & Hogarth, Robin M., 1999. "The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework," Working Papers 1059, California Institute of Technology, Division of the Humanities and Social Sciences.
- Fluet, Claude & Garella, Paolo G., 2002.
"Advertising and prices as signals of quality in a regime of price rivalry,"
International Journal of Industrial Organization,
Elsevier, vol. 20(7), pages 907-930, September.
- Claude Fluet & Paolo G. Garella, 1999. "Advertising and Prices as Signals of Quality in a Regime of Price Rivalry," Cahiers de recherche du Département des sciences économiques, UQAM 9903, Université du Québec à Montréal, Département des sciences économiques.
- Bagwell, Kyle & Riordan, Michael H, 1991.
"High and Declining Prices Signal Product Quality,"
American Economic Review,
American Economic Association, vol. 81(1), pages 224-39, March.
- Burnham, Terence & McCabe, Kevin & Smith, Vernon L., 2000. "Friend-or-foe intentionality priming in an extensive form trust game," Journal of Economic Behavior & Organization, Elsevier, vol. 43(1), pages 57-73, September.
- Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-48, December.
- Yaniv, Ilan, 2004. "Receiving other people's advice: Influence and benefit," Organizational Behavior and Human Decision Processes, Elsevier, vol. 93(1), pages 1-13, January.
When requesting a correction, please mention this item's handle: RePEc:ecl:harjfk:rwp06-010. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.