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Mechanisms for enhancing the credibility of an adviser: prepayment and aligned incentives
Author(s) -
Patt Anthony G.,
Bowles Hannah R.,
Cash David W.
Publication year - 2006
Publication title -
journal of behavioral decision making
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.136
H-Index - 76
eISSN - 1099-0771
pISSN - 0894-3257
DOI - 10.1002/bdm.532
Subject(s) - prepayment of loan , incentive , credibility , advice (programming) , psychology , business , actuarial science , marketing , social psychology , economics , finance , microeconomics , political science , computer science , law , programming language
We tested the effectiveness of prepayment for advice and aligned incentives as mechanisms for enhancing trust in unfamiliar advisers in decision‐making under uncertainty. Participants were low‐income Zimbabweans who played two rounds of the Monty Hall three‐door game. In round 1, participants who purchased advice were significantly more likely to follow advice for how to win the game than were participants who received free advice. In round 2, the apparent effectiveness of advisers' suggestions in round 1 moderated participants' propensity to follow advice. If the round 1 advice appeared wrong, the credibility enhancing benefits of prepayment diminished. If the advice appeared right, the benefits of prepayment maintained. Hypotheses with regard to the benefits of aligned incentives received only weak support. Copyright © 2006 John Wiley & Sons, Ltd.