Decision-making and vulnerability in a pyramid scheme fraud

Stacie A. Bosley, Marc Bellemare, Linda Umwali and Joshua York

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2019, vol. 80, issue C, 1-13

Abstract: Consumer financial fraud is costly to individuals and communities. Yet academic research on the subject is scarce due to how difficult it is to find reliable data. Using a lab-in-the-field artefactual experiment, we study judgment and decision-making as well as the correlates of victimization in a prototypical pyramid scheme fraud. We record demographic, psychological, cognitive, and behavioral characteristics for 452 subjects, and we estimate the impact of an information treatment—specifically, a reminder to carefully consider the odds of winning or losing—on our subjects’ behavior in relation to pyramid scheme fraud. Our results indicate that this straightforward, simple treatment may reduce fraud uptake, but only for subjects with a post-secondary education or high cognitive ability. Subject reliance on probabilities in decision-making and the accuracy of subjective expectations are the most significant predictors of whether one invests in a fraudulent pyramid scheme. Our results can help inform the targeting of consumer protection interventions as well as the potential content of those interventions.

Keywords: Pyramid scheme; Experiment; Consumer fraud (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S2214804318304427
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:80:y:2019:i:c:p:1-13

DOI: 10.1016/j.socec.2019.02.011

Access Statistics for this article

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics) is currently edited by Pablo Brañas Garza

More articles in Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics) from Elsevier
Bibliographic data for series maintained by Catherine Liu ().