← Search

American Economic Review Vol. 101 No. 3 2011

The Limits of Transparency: Pitfalls and Potential of Disclosing Conflicts of Interest

George Loewenstein1; Daylian M. Cain2; Sunita Sah3

1 Department of Social and Decision Sciences, Carnegie Mellon University, Pittsburgh, PA 15213. · 2 Yale School of Management, Yale University, New Haven, CT 06511. · 3 Fuqua School of Business, Duke University, The Fuqua School of Business, 100 Fuqua Drive, Box 90120, Durham, NC 27708.

Abstract

We review evidence from our published and ongoing research that disclosing conflicts of interest has unintended consequences, helping conflicted advisors and harming their advisees: With disclosure, advisors feel comfortable giving more biased advice, but advisees do not properly adjust for this and generally fail to sufficiently discount biased advice. Disclosure also increases pressure on advisees to comply with advice; following disclosure, advisees feel more uncomfortable in turning down advice (e.g., it signals distrust of the advisor's motives). Finally, we examine the effectiveness of policy interventions aimed at reducing these unintended consequences and discuss how to realize potential benefits of disclosure.

DOI
10.1257/aer.101.3.423
Volume
101
Issue
3
Pages
423-428
Language
en
Sources
bibtex:phds-export.bib openalex crossref

Cite