The Dirt on Coming Clean: Perverse Effects of Disclosing Conflicts of Interest

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Citation: Daylian Cain, George Loewenstein, Don Moore (2005) The Dirt on Coming Clean: Perverse Effects of Disclosing Conflicts of Interest. The Journal of Legal Studies (Volume 34) (RSS)

doi: 10.1086/426699


Tagged: Psychology (RSS) decision making (RSS), conflicts of interest (RSS), legal (RSS)


Common sense suggests recipients of advice will benefit if conflicts of interests are disclosed. In fact, many laws have been created in the fields of law, medicine, and finance to protect consumers from conflicts of interest.

If your doctor was on the payroll of a major pharmaceutical company, and then prescribed for you to take a drug made by this company, would you want her to disclose the conflict of interest? Common sense suggests that you’d be more protected if you were aware of it. In this paper, researchers ran experiments that might suggest otherwise. They found that if an adviser had a conflict of interest and told you, she would actually be able to influence you even more in her direction than if she hadn’t. In the case of the doctor, if she disclosed to you that she was on the payroll of the pharmaceutical, and then prescribed you their drug, you would more likely trust the doctor and take it.

In study 1 of this paper, participants were either advisers or estimators trying to guess how much a jar of coins was worth. The adviser gives their opinion to the estimator, and the estimator makes the final guess. The advisers got to look at jars of coins up close, however the estimators could only view the jars from far away for only 10 seconds. The estimators were rewarded based on how accurately they guessed how much money was in each jar. The advisers, on the other hand, were rewarded based on how high the estimators guesses were. In other words, the advisers wanted the estimator to guess high, more than they wanted the estimator to guess accurately - this was the conflict of interest.

In one group the estimators were made aware of the advisers conflict, and in the other group the estimators were not made aware of it. The question is, which group of estimators were more influenced by the adviser's conflict of interest - the group that knew about it, or the group that didn't?

The results were surprising. It turned out the group of estimators who knew about the advisers conflict of interest made higher guesses for the value of the jar of coins than the group who did not know about the conflict.

Why did this happen? The theory is that once the adviser tells you about the conflict, you think “well she wouldn’t have told me if she was going to swindle me so I bet she is telling the truth!”

Theoretical and practical relevance:

This paper has huge implications in everyday contexts. We are often taking advice from doctors, lawyers, accountants, and contractors. All these people are paid to do more work, rather than less work - however we may not need more work. Given that these conflicts exists, people should be more discriminating when taking paid advice from people. Even when conflicts of interest are known, this could end up backfiring because we do not account for the bias.