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When Do Groups Perform Better than Individuals? A Company Takeover Experiment

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  • M. Casari
  • J. Zhang
  • C. Jackson

Abstract

It is still an open question when groups will perform better than individuals in intellectual tasks. We report that in a company takeover experiment, groups placed better bids than individuals and substantially reduced the winner’s curse. This improvement was mostly due to peer pressure over the minority opinion and to group learning. Learning took place from interacting and negotiating consensus with others, not simply from observing their bids. When there was disagreement within a group, what prevailed was not the best proposal but the one of the majority. Groups underperformed with respect to a “truth wins” benchmark although they outperformed individuals deciding in isolation.

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Bibliographic Info

Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number wp763.

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Date of creation: Jun 2011
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Handle: RePEc:bol:bodewp:wp763

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  1. Brit Grosskopf & Yoella Bereby-Meyer & Max Bazerman, 2007. "On the Robustness of the Winner’s Curse Phenomenon," Theory and Decision, Springer, vol. 63(4), pages 389-418, December.
  2. Holt, Charles A & Sherman, Roger, 1994. "The Loser's Curse," American Economic Review, American Economic Association, vol. 84(3), pages 642-52, June.
  3. Reinhard Selten & Klaus Abbink & Ricarda Cox, 2001. "Learning Direction Theory and the Winner’s Curse," Bonn Econ Discussion Papers, University of Bonn, Germany bgse10_2001, University of Bonn, Germany.
  4. Ball, Sheryl B. & Bazerman, Max H. & Carroll, John S., 1991. "An evaluation of learning in the bilateral winner's curse," Organizational Behavior and Human Decision Processes, Elsevier, Elsevier, vol. 48(1), pages 1-22, February.
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Cited by:
  1. Cooper, David J. & Sutter, Matthias, 2011. "Role Selection and Team Performance," IZA Discussion Papers 5892, Institute for the Study of Labor (IZA).
  2. Thomas Stöckl & Jürgen Huber & Michael Kirchler & Florian Lindner, 2013. "Hot Hand and Gambler's Fallacy in Teams: Evidence from Investment Experiments," Working Papers 2013-04, Faculty of Economics and Statistics, University of Innsbruck.
  3. Jingjing Zhang, 2012. "Communication in asymmetric group competition over public goods," ECON - Working Papers, Department of Economics - University of Zurich 069, Department of Economics - University of Zurich.
  4. Frans van Dijk & Joep H. Sonnemans & Ed Bauw, 2012. "Judicial Error by Groups and Individuals," Tinbergen Institute Discussion Papers 12-029/3, Tinbergen Institute.
  5. Jeanette Brosid-Koch & Timo Heinrich & Christoph Helbach, 2013. "Does Truth Win When Teams Reason Strategically?," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0396, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  6. Brosig-Koch, Jeannette & Heinrich, Timo & Helbach, Christoph, 2014. "Does truth win when teams reason strategically?," Economics Letters, Elsevier, vol. 123(1), pages 86-89.
  7. Tamar Kugler & Edgar E. Kausel & Martin G. Kocher, 2012. "Are Groups more Rational than Individuals? A Review of Interactive Decision Making in Groups," CESifo Working Paper Series 3701, CESifo Group Munich.

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