- A-Z
- Jena Economic Resea...
- Volume 6
- Do voluntary paymen...
- Abgebildete Person
- Erschienen
- 28. März 2012
- Nummer des Discussion-Papers
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2012-011
- Schlagwort(e)
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asymmetric information
experiments
financial advisors
principal–agent
reciprocity
sender-receiver game
voluntary payment
- Zusammenfsg.
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The market for retail financial products (e.g. investment funds or insurances) is marred by information asymmetries. Clients are not well informed about the quality of these products. They have to rely on the recommendations of advisors. Incentives of advisors and clients may not be aligned, when fees are used by financial institutions to steer advice. We experimentally investigate whether voluntary contract components can reduce the conflict of interest and increase truth telling of advisors. We compare a voluntary payment upfront, an obligatory payment upfront, a voluntary bonus afterwards, and a three-stage design with a voluntary payment upfront and a bonus after. Across treatments, there is significantly more truthful advice when both clients and advisors have opportunities to reciprocate. Within treatments, the frequency of truthful advice is significantly higher when the voluntary payment is large.
- article pub. typess JER
- Research article
- article languages JER
- Englisch
- JEL-Classification for JER
- C91 - Laboratory, Individual Behavior ; D0 - General; D82 - Asymmetric and Private Information ; G20 - General ; L15 - Information and Product Quality; Standardization and Compatibility ; M52 - Compensation and Compensation Methods and Their Effects