International Law

Fraud News for Monday

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Robert FitzPatrick has a very interesting observation about victims of fraud:

"There is a counter-intuitive rule in the world of scams. It is that the easiest person to fleece is someone who has recently been fleeced.

Wouldn't the previous loss cause the consumer to be more vigilant, plus experienced now? Sadly, for many, no. To the contrary, stronger motives and forces drive consumers, once burned, to fall again, often harder. Those forces - anger, disappointment, shame and confusion - instill in many consumers a burning desire to rectify their plight, to redeem themselves in their own eyes and to their friends and families. They must prove themselves right.

Robin Hanson, at Overcoming Bias, points out a fascinating paradox, trusting and not verifying:

Aimone and Houser find we are willing to pay to avoid knowing that we have been betrayed:  Here we report data from one-shot two-person binary investment games in which investors can choose not to know the decision of their particular trustee, and instead receive payment according to a random draw from a separate pool of decisions identical to the pool of trustees' decisions. Note that the probability of receiving the "cooperative" outcome is identical in the two cases, and participants understand this is the case. ...

Our main finding is that investors systematically prefer to remain ignorant of their specific trustee's decision. Moreover, when avoiding this information is not possible investors are substantially less likely to make trusting decisions. These results are convergent evidence that outcome-based models cannot fully explain economic decision making in strategic environments.

Full post as published by Misleading Advertising Law on October 27, 2008 (boomark / email).