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Over-Caution of Large Committees of Experts

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  • Rune Midjord
  • Tomás Rodríguez Barraquer
  • Justin Mattias Valasek
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    Abstract

    In this paper, we consider a committee of experts that decides whether to approve or reject a proposed innovation on behalf of society. In addition to a payoff linked to the adequateness of the committee’s decision, each expert receives a disesteem payoff if he/she voted in favor of an ill-fated innovation. An example is FDA committees, where committee members can be exposed to a disesteem payoff (negative) if they vote to pass a drug that proves to be fatal for some users. Under the standard voting model, we show that information is aggregated in large committees provided disesteem payoffs are not overly large. However, we go on to document an empirically-relevant discontinuity in the standard model: if an arbitrarily large number of signals does not perfectly reflect the state of the world then, no matter how small the disesteem payoffs are, information aggregation fails in large committees and the committee rejects the innovation almost surely, providing an explanation for over-caution in committees.

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    File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2014/wp-cesifo-2014-05/cesifo1_wp4810.pdf
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    Bibliographic Info

    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4810.

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    Date of creation: 2014
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    Handle: RePEc:ces:ceswps:_4810

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    Related research

    Keywords: committees; information aggregation; disesteem payoffs;

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    References

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    1. Ottaviani, Marco & Sorensen, Peter, 2001. "Information aggregation in debate: who should speak first?," Journal of Public Economics, Elsevier, vol. 81(3), pages 393-421, September.
    2. Brennan, Geoffrey & Pettit, Philip, 2004. "The Economy of Esteem: An Essay on Civil and Political Society," OUP Catalogue, Oxford University Press, number 9780199246489.
    3. Callander, Steven, 2008. "Majority rule when voters like to win," Games and Economic Behavior, Elsevier, vol. 64(2), pages 393-420, November.
    4. Ellingsen, Tore & Johannesson, Magnus, 2006. "Pride and Prejudice: The Human Side of Incentive Theory," CEPR Discussion Papers 5768, C.E.P.R. Discussion Papers.
    5. John Morgan & Felix V�rdy, 2012. "Mixed Motives and the Optimal Size of Voting Bodies," Journal of Political Economy, University of Chicago Press, vol. 120(5), pages 986 - 1026.
    6. Bezalel Peleg & Shmuel Zamir, 2012. "Extending the Condorcet Jury Theorem to a general dependent jury," Social Choice and Welfare, Springer, vol. 39(1), pages 91-125, June.
    7. Gerling, Kerstin & Gruner, Hans Peter & Kiel, Alexandra & Schulte, Elisabeth, 2005. "Information acquisition and decision making in committees: A survey," European Journal of Political Economy, Elsevier, vol. 21(3), pages 563-597, September.
    8. Li Hao & Wing Suen, 2009. "Viewpoint: Decision-making in committees," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 359-392, May.
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