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On the relationship between individual and group decisions

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  • Sobel, Joel

    ()
    (Department of Economics, University of California, San Diego)

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    Abstract

    Each member of a group receives a signal about the unknown state of the world and decides upon a utility-maximizing recommendation on the basis of that signal. The individuals have identical preferences. The group makes a decision that maximizes the common utility function assuming perfect pooling of the information in individual signals. An action profile is a group action and a recommendation from each individual. A collection of action profiles is rational if there exists an information structure under which all elements in the collection arise with positive probability. With no restrictions on the information structure, essentially all action profiles are rational. In fact, given any distribution over action profiles it is possible to find an information structure that approximates the distribution. In a monotone environment in which individuals receive conditionally independent signals, essentially any single action profile is rational, although some collections of action profiles are not.

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    File URL: http://econtheory.org/ojs/index.php/te/article/viewFile/20140163/10210/311
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    Bibliographic Info

    Article provided by Econometric Society in its journal Theoretical Economics.

    Volume (Year): 9 (2014)
    Issue (Month): 1 (January)
    Pages:

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    Handle: RePEc:the:publsh:1185

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    Web page: http://econtheory.org

    Related research

    Keywords: Statistical decision problem; group polarization; behavioral economics; psychology; forecasting;

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    References

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    1. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Jonathan Levin & Susan Athey, 2001. "The Value of Information in Monotone Decision Problems," Working Papers 01003, Stanford University, Department of Economics.
    3. Christopher Chambers & Paul Healy, 2012. "Updating toward the signal," Economic Theory, Springer, vol. 50(3), pages 765-786, August.
    4. Robert T. Clemen & Robert L. Winkler, 1990. "Unanimity and Compromise Among Probability Forecasters," Management Science, INFORMS, vol. 36(7), pages 767-779, July.
    5. Kfir Eliaz & Debraj Ray & Ronny Razin, 2006. "Choice Shifts in Groups: A Decision-Theoretic Basis," American Economic Review, American Economic Association, vol. 96(4), pages 1321-1332, September.
    6. Robert L. Winkler, 1986. "Expert Resolution," Management Science, INFORMS, vol. 32(3), pages 298-303, March.
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    Cited by:
    1. Spiros Bougheas & Jeroen Nieboerr & Martin Sefton, . "Risk Taking and Information Aggregation in Groups," Discussion Papers 2014-09, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.

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