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Mechanisms for Enhancing the Credibility of an Adviser: Prepayment and Aligned Incentives

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  • Patt, Anthony G.

    (Harvard U)

  • Bowles, Hannah Riley
  • Cash, David W.

    (Massachusetts Executive Office of Environmental Affairs)

Abstract

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.

Suggested Citation

  • Patt, Anthony G. & Bowles, Hannah Riley & Cash, David W., 2006. "Mechanisms for Enhancing the Credibility of an Adviser: Prepayment and Aligned Incentives," Working Paper Series rwp06-010, Harvard University, John F. Kennedy School of Government.
  • Handle: RePEc:ecl:harjfk:rwp06-010
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    File URL: https://research.hks.harvard.edu/publications/workingpapers/citation.aspx?PubId=3453&type=WPN
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    References listed on IDEAS

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    4. 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 933-946, September.
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    7. 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.
    8. 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.
    9. 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 1325-1348, December.
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    11. Bagwell, Kyle & Riordan, Michael H, 1991. "High and Declining Prices Signal Product Quality," American Economic Review, American Economic Association, vol. 81(1), pages 224-239, March.
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    Cited by:

    1. Andrea Damm & Katharina Eberhard & Jan Sendzimir & Anthony Patt, 2013. "Perception of landslides risk and responsibility: a case study in eastern Styria, Austria," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 69(1), pages 165-183, October.
    2. Effron, Daniel A. & Miller, Dale T., 2015. "Do as I say, not as I’ve done: Suffering for a misdeed reduces the hypocrisy of advising others against it," Organizational Behavior and Human Decision Processes, Elsevier, vol. 131(C), pages 16-32.
    3. repec:spr:masfgc:v:23:y:2018:i:4:d:10.1007_s11027-017-9747-y is not listed on IDEAS
    4. Gino, Francesca, 2008. "Do we listen to advice just because we paid for it? The impact of advice cost on its use," Organizational Behavior and Human Decision Processes, Elsevier, vol. 107(2), pages 234-245, November.
    5. Gino, Francesca & Shang, Jen & Croson, Rachel, 2009. "The impact of information from similar or different advisors on judgment," Organizational Behavior and Human Decision Processes, Elsevier, vol. 108(2), pages 287-302, March.

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