Abstract
Industry gifts to experts tasked with making decisions on behalf of their clients are a common phenomenon. We analyze the impact of such gifts on experts' product recommendations and diagnostic effort decisions in a laboratory experiment. A theoretical model in which the expert cares for the client but also has a reciprocity concern, predicts biased recommendations and distorted diagnostic effort, depending on prior information. To test this, we conduct a laboratory experiment in which experts repeatedly make product choices for clients whose need is uncertain.