How Effective is Advice from Interested Parties? An Experimental Test Using a Pure Coordination Game

Abstract

This study experimentally investigates whether and how the effect of non-binding advice in coordination is influenced by knowledge of the adviser’s motive. We use pure coordination games in which a non-playing adviser makes a recommendation of which strategy to play. The advisor either does or does not have a stake in the final payoff of the game. We find that if the advice appears to be “self-interested” (i.e., the adviser has a monetary stake in the advice being followed), it is less effective than if the same advice is given by a neutral independent party with no economic interest in the game. That is, the effectiveness of advice appears to be affected by knowledge of the adviser’s motive. We discuss the significance of our results for the effectiveness of advice in real-world economic and organizational situations