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Group decision rules and group rationality under risk

Author

Listed:
  • Aurélien Baillon

    (Erasmus University Rotterdam)

  • Han Bleichrodt

    (Erasmus University Rotterdam)

  • Ning Liu

    (Erasmus University Rotterdam)

  • Peter P. Wakker

    (Erasmus University Rotterdam)

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.

Suggested Citation

  • Aurélien Baillon & Han Bleichrodt & Ning Liu & Peter P. Wakker, 2016. "Group decision rules and group rationality under risk," Journal of Risk and Uncertainty, Springer, vol. 52(2), pages 99-116, April.
    • Handle: RePEc:kap:jrisku:v:52:y:2016:i:2:d:10.1007_s11166-016-9237-8
    DOI: 10.1007/s11166-016-9237-8
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    More about this item

    Keywords

    Group decisions under risk; Unanimity rule; Majority rule; Allais paradox;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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