Paradoxical Effects of the Disclosure of Conflict of Interest on the Selection of a Pension Plan
32 Pages Posted: 7 Dec 2010 Last revised: 30 May 2011
Date Written: December 6, 2010
Rules requiring the disclosure of conflicts of interest are often established to reduce information asymmetries and so protect consumers from biased information. We report on an experimental study assessing the effect of disclosure by an insurance agent of his differential earnings for two savings plans -- a pension plan and an "executive insurance" savings plan. A "semantic differential" analysis brought out the dimensions along which the two products differ, and suggests why disclosure has no effect for most of the public, and has an excessive impact on the more financially literate segment of the population. In the situation studied, fair disclosure of conflict of interest, even of the boldest kind, do not always help the consumer.
Keywords: fair disclosure, conflict of interest, behavioral economics, saving , consumer protection, financial literacy
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