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Experts with a conflict of interest: a source of ambiguity?

Published online by Cambridge University Press:  14 March 2025

Douglas A. Norton  and
R. Mark Isaac
Douglas A. Norton
Affiliation:
Florida State University, Tallahassee, FL, USA
R. Mark Isaac*
Affiliation:
Florida State University, Tallahassee, FL, USA
*
[email protected]
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Abstract

We present an experimental design where uncertainty is generated from the advice of experts with conflicts of interest. In this experiment clients are faced with a variant of a multi-armed bandit problem with a random end-time. On the known arm (the “task screen”), clients can earn a certain payment per completion of a decoding task. However, clients may also opt for the unknown arm where they earn an uncertain amount if they end the experiment on this “expert screen”. The amount is uncertain to the clients because the value is being communicated through an “expert” with conflicted incentives. A control session provides for direct transmission of the value to the clients. Our results show that ambiguity aversion is alive-and-well in this environment. Also, when we vary the wage rate on the known arm we find that higher opportunity cost clients are less likely to heed the advice of conflicted experts.

Keywords

Ambiguity aversionConflicts of interestMulti-armed bandit problemsCredence goodsAdvice
Type
Original Paper
Information
Experimental Economics , Volume 15 , Issue 2 , June 2012 , pp. 260 - 277
Copyright
Copyright © 2011 Economic Science Association

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Footnotes

Electronic supplementary material The online version of this article (doi:https://doi.org/10.1007/s10683-011-9299-z) contains supplementary material, which is available to authorized users.

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