When Sunlight Fails to Disinfect: Understanding the Perverse Effects of Disclosing Conflicts of Interest

Abstract

Disclosure is often proposed as a remedy for conflicts of interest, but it can backfire, hurting those whom it is intended to protect. Building on our prior research, we introduce a conceptual model of disclosure’s effects on advisors and advice recipients that helps to explain when and why it backfires. Studies 1 and 2 examine psychological mechanisms (strategic exaggeration, moral licensing) by which disclosure can lead advisors to give more-biased advice. Study 3 shows that disclosure backfires when advice recipients who receive disclosure fail to sufficiently discount and thus fail to mitigate the adverse effects of disclosure on advisor bias. Study 4 identifies one remedy for inadequate discounting of biased advice: explicitly and simultaneously contrasting biased advice with unbiased advice.

Anxiety, Advice, and the Ability to Discern: Feeling Anxious Motivates Individuals to Seek and Use Advice

“…Conflicted advisors often allow their personal preferences to influence the advice they offer others (Cain, Loewenstein, & Moore, 2005. In general, advisees, even when they are aware of the conflict of interest, rely heavily on the advice they receive (Cain et al, 2005(Cain et al, , 2011. By eroding confidence, we expect anxiety to exacerbate this problem.…”

Giving Feedback to Clients

“…In these examples, the ex-post happiness is either non-existent (when there is no well-defined objective truth) or is dominated by the ex-ante happiness in determining the agent's payoff (when there is a long elapsed time for the truth to be revealed). Thus, the explicit link between the 24 For related works on agent-client interactions where the client is unlikely to find out the truth, see Cain, Loewenstein, and Moore (2011 …”

From Libertarian Paternalism to Nudging—and Beyond

“…Consider the example of disclosure of conflict of interest: because doctors who experience a conflict of interest tend to treat patients differently than without such a conflict, policies have been proposed that would make the disclosure of such conflicts of interest mandatory. However, although disclosure of conflict of interest successfully inform people's deliberations, they also trigger two other processes that lead to increased, instead of the expected reduced compliance (Sah et al 2013): the insinuation anxiety lets advisees fear that rejecting advice may signal to the advisor that they believe the advisor is corrupt; and the panhandler effect lets advisees feel the pressure to help advisers obtain their personal interests once the adviser discloses this interest (Cain et al 2011). To understand how the policy is sensitive to such side effects, mechanistic evidence about their operation must be available.…”