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]|
|Contact details of provider:|| Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany|
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
References listed on IDEAS
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.:
- 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.
- Claus Bjørn Jørgensen & Sigrid Suetens & Jean-Robert Tyran, 2011.
"Predicting Lotto Numbers,"
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.
- Jørgensen, Claus Bjørn & Suetens, Sigrid & Tyran, Jean-Robert, 2011. "Predicting Lotto Numbers," CEPR Discussion Papers 8314, C.E.P.R. Discussion Papers.
- Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December.
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp6557. 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: (Mark Fallak)
If references are entirely missing, you can add them using this form.