Consumers, Seller-Advisors, and the Psychology of Trust

Abstract

Every day, consumers ask sellers for advice. Because they do not or cannot know better, consumers rely on that advice in making financial decisions of varying significance. Sellers, motivated by strong and often conflicting self-interests, are well-positioned to lead consumers to make decisions that are profitable for sellers and may be harmful to the consumers themselves. Short of imposing fraud liability in extreme situations, the law neither protects the trust consumers place in “seller-advisors,” nor alerts them to the incentives motivating the advice that sellers give. This Article makes several contributions to the literature. First, it identifies and defines the seller-advisor. Sellers and advisors are usually regarded separately by the law; therefore, consumers interacting with them are protected by different rules. As a result, a false dichotomy has arisen between (1) a doctrine of caveat emptor, subject to liability for fraud and applying to consumers interacting with sellers, and (2) fiduciary duties protecting consumers interacting with advisors. This Article is the first attempt to study consumer trust in the many common transactions that fall somewhere in the space between. Second, in reporting the results of an original psychology experiment, this Article offers empirical evidence of how consumers’ decision making is influenced by the trust they place in seller-advisors. Finally, it explores how consumer trust in seller-advisors arises and how it can be manipulated in an effort to understand how legal policy should respond to both the ubiquity of seller-advisors and the consequences of consumer reliance on, and vulnerability to, their advice.