Working Paper: CEPR ID: DP13711
Authors: Roman Inderst; Kiryl Khalmetski; Axel Ockenfels
Abstract: We study strategic communication between a customer and an advisor who is privately informed about the best suitable choice for the customer, but whose preferences are misaligned with the customer’s preferences. The advisor sends a message to the customer who, in turn, can secure herself from bad advice by acquiring costly information on her own. We find that making the customer’s information acquisition less costly, e.g., through consumer protection regulation or digital information aggregation and dissemination, leads to less prosocial behavior of the advisor. This can be explained by a model of shared guilt, which predicts a shift in causal attribution of guilt from the advisor to the customer if the latter could have avoided her ex post disappointment.
Keywords: shared guilt; trust; guilt aversion; responsibility diffusion; advice
JEL Codes: C91; D82; D83
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| As the foregone outside option of the customer improves (D11) | Advisor's likelihood of lying increases (C92) |
| Reducing the cost of information acquisition for customers (D16) | Increase in the tendency of advisors to lie (G40) |
| Easier access to information for customers (L86) | Advisor feels less guilty for providing poor advice (D80) |
| Lower costs of obtaining information (D83) | Shift in responsibility for outcomes (I24) |