Article
Decision-making and vulnerability in a pyramid scheme fraud
Journal of Behavioral and Experimental Economics
(2019)
Abstract
Consumer financial fraud is costly to individuals and communities. Yet academic research on the subject is scarce due to how difficult it is to find reliable data. Using a lab-in-the-field artefactual experiment, we study judgment and decision-making as well as the correlates of victimization in a prototypical pyramid scheme fraud. We record demographic, psychological, cognitive, and behavioral characteristics for 452 subjects, and we estimate the impact of an information treatment—specifically, a reminder to carefully consider the odds of winning or losing—on our subjects’ behavior in relation to pyramid scheme fraud. Our results indicate that this straightforward, simple treatment may reduce fraud uptake, but only for subjects with a post-secondary education or high cognitive ability. Subject reliance on probabilities in decision-making and the accuracy of subjective expectations are the most significant predictors of whether one invests in a fraudulent pyramid scheme. Our results can help inform the targeting of consumer protection interventions as well as the potential content of those interventions.
Keywords
- Pyramid scheme,
- experiment,
- consumer fraud
Disciplines
Publication Date
Summer June, 2019
DOI
https://doi.org/10.1016/j.socec.2019.02.011
Citation Information
Stacie A. Bosley. "Decision-making and vulnerability in a pyramid scheme fraud" Journal of Behavioral and Experimental Economics Vol. 80 (2019) p. 1 - 13 Available at: http://works.bepress.com/stacie-bosley/30/