A free-rider problem arises when a group choice between two alternatives has to be made on the basis of privately collected evidence, leading to insufficient effort in gathering evidence and an ex ante welfare loss for the group. To alleviate the free-rider problem, the group can commit to a "conservative" rule, whereby the decision is made against the alternative favored by the group's preference or prior when evidence supports it but is not preponderant. Optimal conservatism increases private incentives to gather evidence and improves the quality of the group decision. My result explains why sometimes groups appear overly cautious toward favored alternatives.
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Volume (Year): 109 (2001) Issue (Month): 3 (June) Pages: 617-636 Download reference. The following formats are available: HTML
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Yeon-Koo Che & Navin Karthik, 2007.
"Opinions as incentives,"
Discussion Papers
0708-09, Columbia University, Department of Economics.
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Other versions:
Che, Yeon-Koo & Kartik, Navin, 2006.
"Opinion as Incentives,"
MPRA Paper
6094, University Library of Munich, Germany, revised 15 Nov 2007.
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