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Are small groups expected utility?

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  • Morone, Andrea
  • Morone, Piergiuseppe

Abstract

In this paper we analyse the empirical performance of several preference functionals using individual and group data. Our investigation aims to address two fundamental questions that have, until now, not been addressed in literature. Specifically, we intend to assess if there exists a risky choice theory that statistically fits group decisions significantly better than alternative theories, and if there are significant differences between individual and group choices. Experimental findings reported in this paper provide answers to both questions showing that when risky choices are undertaken by small groups (dyads in our case), disappointment aversion outperforms several alternative preference functionals, including expected utility. Since expected utility typically emerged as the dominant model in individual risky choices, this finding suggests that differences between individual and group choices exist, showing that the preference aggregation process drives out EU.

Suggested Citation

  • Morone, Andrea & Morone, Piergiuseppe, 2012. "Are small groups expected utility?," MPRA Paper 38198, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:38198
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    References listed on IDEAS

    as
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. How group utility differs from individual utility
      by Economic Logician in Economic Logic on 2012-05-14 19:13:00

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    Cited by:

    1. Morone, A. & Morone, P. & Germani, A.R., 2014. "Individual and group behaviour in the traveler's dilemma: An experimental study," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 49(C), pages 1-7.
    2. Michailova, Julija, 2010. "Overconfidence, risk aversion and (economic) behavior of individual traders in experimental asset markets," MPRA Paper 26390, University Library of Munich, Germany.
    3. Morone, Andrea & Ozdemir, Ozlem, 2012. "Black swan protection: an experimental investigation," MPRA Paper 38842, University Library of Munich, Germany.
    4. Suter, Jordan F. & Spraggon, John M. & Poe, Gregory L., 2011. "Thin and lumpy: an experimental investigation of water quality trading," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 104023, Agricultural and Applied Economics Association.

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    More about this item

    Keywords

    group decision; expected utility; risk and uncertainty;
    All these keywords.

    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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