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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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    2. Kaveh Rashidi & Anthony Patt, 2018. "Subsistence over symbolism: the role of transnational municipal networks on cities’ climate policy innovation and adoption," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 23(4), pages 507-523, April.
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    4. Robert M. Gillenkirch & Julia Ortner & Sebastian Robert & Louis Velthuis, 2023. "Designing incentives and performance measurement for advisors: How to make decision-makers listen to advice," Working Papers 2304, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz.
    5. William M. Fonta & Safietou Sanfo & Abbi M. Kedir & Djiby R. Thiam, 2018. "Estimating farmers’ willingness to pay for weather index-based crop insurance uptake in West Africa: Insight from a pilot initiative in Southwestern Burkina Faso," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 6(1), pages 1-20, December.
    6. Firk, Sebastian & Detzen, Nina & Hennig, Jan C. & Wolff, Michael, 2024. "Strengthening the CEO–CFO interplay: The role of regulatory focus and similar compensation plans," Accounting, Organizations and Society, Elsevier, vol. 113(C).
    7. 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.
    8. Blunden, Hayley & Logg, Jennifer M. & Brooks, Alison Wood & John, Leslie K. & Gino, Francesca, 2019. "Seeker beware: The interpersonal costs of ignoring advice," Organizational Behavior and Human Decision Processes, Elsevier, vol. 150(C), pages 83-100.
    9. 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.
    10. 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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