Group Decision Rules and Group Rationality under Risk

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Abstract

This paper investigates the rationality of group decisions versus individual decisions under risk. We study two group decision rules, majority and unanimity, in stochastic dominance and Allais paradox tasks. We distinguish communication effects (the effects of group discussions and interactions) from aggregation effects (mere impact of the voting procedure), which makes it possible to better understand the complex dynamics of group decision making. In an experiment, both effects occurred for intellective tasks whereas there were only aggregation effects in judgmental tasks. Communication effects always led to more rational choices; aggregation effects did so sometimes but not always. Groups violated stochastic dominance less often than individuals did, which was due to both aggregation and communication effects. In the Allais paradox tasks, there were almost no communication effects, and aggregation effects made groups deviate more from expected utility than individuals.
Original languageEnglish
Pages (from-to)99-116
Number of pages18
JournalJournal of Risk and Uncertainty
Volume52
Issue number2
DOIs
Publication statusPublished - 15 Jun 2016

Bibliographical note

JEL Classification: D81, C91
Acknowledgments:
Gary Charness, Enrico Diecidue, Yoram Halevy, the editor W. Kip Viscusi, and an anonymous reviewer gave helpful suggestions. The research of Aurélien Baillon was made possible by a grant from the Netherlands Organization for Scientific Research (NWO).

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