Why Do People Pay for Useless Advice?

Nattavudh Powdthavee and Yohanes Riyanto

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: We investigated experimentally whether people can be induced to believe in a non-existent expert, and subsequently pay for what can only be described as transparently useless advice about future chance events. Consistent with the theoretical predictions made by Rabin (2002) and Rabin and Vayanos (2010), we show empirically that the answer is yes and that the size of the error made systematically by people is large.

Keywords: Behavioral finance; hot-hand; random streak; expertise; information (search for similar items in EconPapers)
JEL-codes: C91 D03 (search for similar items in EconPapers)
Date: 2012-06
New Economics Papers: this item is included in nep-bec and nep-cbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Working Paper: Why do people pay for useless advice? (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp1153

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