Persistent Bias in Advice-Giving
University of Zurich, Department of Economics, Working Paper No. 228, Revised version
49 Pages Posted: 2 Jun 2016 Last revised: 6 Nov 2017
Date Written: October 6, 2017
We show that a one-off incentive to bias advice has persistent effects. In an experiment, advisers were paid a bonus to recommend a lottery which only risk-seeking individuals should choose to a less informed client. Afterwards, they had to choose for themselves and make a second recommendation to another client, without any bonus. These advisers choose the risky lottery and recommend it a second time up to six times more often than advisers in a control group who were never offered a bonus. These results are consistent with a theory we present which is based on advisers' image concerns of appearing incorruptible.
Keywords: Advice-giving, conflict of interest, self-signaling, self-deception
JEL Classification: C91, D03, D83, G11
Suggested Citation: Suggested Citation