Why Do People Pay for Useless Advice? Implications of Gambler's and Hot-Hand Fallacies in False-Expert Setting
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:||May 2012|
|Publication status:||published as 'Would You Pay for Transparently Useless Advice? A Test of Boundaries of Beliefs in the Folly of Predictions' in: Review of Economics and Statistics, 2014, [Online First]|
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References listed on IDEAS
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- Jørgensen, Claus Bjørn & Suetens, Sigrid & Tyran, Jean-Robert, 2011.
"Predicting Lotto Numbers,"
CEPR Discussion Papers
8314, C.E.P.R. Discussion Papers.
- Claus Bjørn Jørgensen & Sigrid Suetens & Jean-Robert Tyran, 2011. "Predicting Lotto Numbers," Discussion Papers 11-10, University of Copenhagen. Department of Economics.
- Jorgensen, C.B. & Suetens, S. & Tyran, J.R., 2011. "Predicting Lotto Numbers," Discussion Paper 2011-033, Tilburg University, Center for Economic Research.
- 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.
- 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.
- Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December. Full references (including those not matched with items on IDEAS)
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