Events at CERGE-EI

Monday, 14 January, 2019 | 14:00 | Applied Micro Research Seminar

Prof. Ola Kvaløy (U. of Stavanger, Norway) “Fair Advice”

Prof. Ola Kvaløy

University of Stavanger, Norway


Authors: Oege Dijk, Kristoffer W. Eriksen, Sebastian Fest, and Ola Kvaløy

Abstract: Millions of investors put trust in financial advisors who have incentives to give them bad advice. This indicates that advisors behave more fairly than standard economic theory predicts. In this paper, we present results from a large-scale online experiment studying advisors’ behavior under conflicting interests. We use a binary dictator game as a baseline and transform the game into a situation in which the dictator gives a binding advice and a free non-binding advice, respectively. We also vary the payoff functions to include both certain and risky outcomes. Our results show that people are averse to giving bad advice. When subjects are given the role as advisors, they behave less selfishly, even when the economic and strategical considerations remain unchanged. Moreover, we find that the moral costs of giving a bad advice is larger when the advisors cannot dictate the clients’ decision, but rather have to induce the clients to make bad choices for themselves.
Full Text: “Fair Advice”