DP13711 Sharing Guilt: How Better Access to Information May Backfire

Author(s): Roman Inderst
Publication Date: May 2019
Date Revised: May 2019
Keyword(s): Advice, Guilt aversion, responsibility diffusion, shared guilt, Trust
JEL(s): C91, D82, D83
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13711

We study strategic communication between a customer and an advisor who is privately informed about the best suitable choice for the customer, but whose preferences are misaligned with the customer's preferences. The advisor sends a message to the customer who, in turn, can secure herself from bad advice by acquiring costly information on her own. We find that making the customer's information acquisition less costly, e.g., through consumer protection regulation or digital information aggregation and dissemination, leads to less prosocial behavior of the advisor. This can be explained by a model of shared guilt, which predicts a shift in causal attribution of guilt from the advisor to the customer if the latter could have avoided her ex post disappointment.