2016-08-29Buch DOI: 10.18452/4638
What renders financial advisors less treacherous?
On commissions and reciprocity
An advisor is supposed to recommend a financial product in the best interest of her client. However, the best product for the client may not always be the product yielding the highest commission to the advisor. Do advisors nevertheless provide truthful advice? If not, will a voluntary or obligatory upfront payment by clients induce more truthful advice? According to the results, both types of payment lead to more truthful advice. More generally, in a senderreceiver game with con ict of interest, an upfront payment to the sender by the receiver improves information transmission.
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