On the informational content of advice

A theoretical and experimental study

Yaw Nyarko, Andrew Schotter, Barry Sopher

    Research output: Contribution to journalArticle

    Abstract

    This paper examines the market for advice and the underlying perception that advice is useful and informative. We do this by first providing a theoretical examination of the informational content of advice and then by setting up a series of experimental markets where this advice is sold. In these markets we provide bidders with a demographic profile of the "experts" offering advice. The results of our experiment generate several interesting findings. The raw bid data suggest that subjects bid significantly more for data than they do for advice. Second, in the market for advice there appears to be no consensus as to who are the best advisors although on average economists demand the highest mean price and women suffer a discount. In addition, we find that whether a subject suffers from a representativeness bias in the way he or she processes data has an impact on how he or she bids for advice and on his or her willingness to follow it once offered. Finally, we find that on average people impute a low level of informativeness onto advice, consistent with their bidding behavior for data versus advice.

    Original languageEnglish (US)
    Pages (from-to)433-452
    Number of pages20
    JournalEconomic Theory
    Volume29
    Issue number2
    DOIs
    StatePublished - Oct 2006

    Fingerprint

    Experimental study
    Informational content
    Bid
    Bidding behavior
    Discount
    Economists
    Advisors
    Experiment
    Willingness
    Informativeness
    Demographics
    Experimental markets

    Keywords

    • Advice
    • Decision making
    • Experiments
    • Risk aversion

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    On the informational content of advice : A theoretical and experimental study. / Nyarko, Yaw; Schotter, Andrew; Sopher, Barry.

    In: Economic Theory, Vol. 29, No. 2, 10.2006, p. 433-452.

    Research output: Contribution to journalArticle

    Nyarko, Yaw ; Schotter, Andrew ; Sopher, Barry. / On the informational content of advice : A theoretical and experimental study. In: Economic Theory. 2006 ; Vol. 29, No. 2. pp. 433-452.
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