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Choice Shifts in Groups: A Decision-Theoretic Basis

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Author Info

  • Kfir Eliaz
  • Debraj Ray
  • Ronny Razin

Abstract

The phenomenon of choice shifts in group decision-making has received attention in the social psychology literature. Faced with a risky group decision, individuals appear to support more extreme choices relative to those they would make on their own. This paper demonstrates that from a decision-theoretic perspective, choice shifts are intimately connected to failures of expected utility theory. In the model studied here, the Allais paradox is equivalent to a well-studied configuration of choice shifts. Thus, our results marry two well-known behavioral regularities, one in individual decision theory and another in the social psychology of groups. (JEL D71, D81)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.96.4.1321
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 96 (2006)
Issue (Month): 4 (September)
Pages: 1321-1332

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Handle: RePEc:aea:aecrev:v:96:y:2006:i:4:p:1321-1332

Note: DOI: 10.1257/aer.96.4.1321
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Citations

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Cited by:
  1. Carlsson, Fredrik & Martinsson, Peter & Qin, Ping & Sutter, Matthias, 2009. "Household decision making and the influence of spouses’ income, education, and communist party membership: A field experiment in rural China," Working Papers in Economics 356, University of Gothenburg, Department of Economics.
  2. Kocher, Martin & Matthias Sutter, 2003. "Individual versus group behavior and the role of the decision making procedure in gift-exchange experiments," Royal Economic Society Annual Conference 2003 125, Royal Economic Society.
  3. Demont, Matty & Rutsaert, Pieter & Ndour, Maimouna & Verbeke, Wim & Seck, Papa Abdoulaye & Tollens, Eric, 2012. "Experimental auctions, collective induction and choice shift: Willingness-to-pay for rice quality in Senegal," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126861, International Association of Agricultural Economists.
  4. Carlsson, Fredrik & He, Haoran & Martinsson, Peter & Qin, Ping & Sutter, Matthias, 2012. "Household decision making in rural China: Using experiments to estimate the influences of spouses," Journal of Economic Behavior & Organization, Elsevier, vol. 84(2), pages 525-536.
  5. Sobel, Joel, 0. "On the relationship between individual and group decisions," Theoretical Economics, Econometric Society.
  6. Daniela Di Cagno & Emanuela Sciubba & Marco Spallone, 2012. "Choosing a gambling partner: testing a model of mutual insurance in the lab," Theory and Decision, Springer, vol. 72(4), pages 537-571, April.
  7. Wolfgang Luhan & Martin Kocher & Matthias Sutter, 2009. "Group polarization in the team dictator game reconsidered," Experimental Economics, Springer, vol. 12(1), pages 26-41, March.

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