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Choice Shifts in Groups: A Decision-Theoretic Basis

  • Kfir Eliaz
  • Debraj Ray
  • Ronny Razin

The phenomenon of choice shifts in group decision-making has received attention in the social psychology literature. Faced with a risky group decision, individuals appear to support more extreme choices relative to those they would make on their own. This paper demonstrates that from a decision-theoretic perspective, choice shifts are intimately connected to failures of expected utility theory. In the model studied here, the Allais paradox is equivalent to a well-studied configuration of choice shifts. Thus, our results marry two well-known behavioral regularities, one in individual decision theory and another in the social psychology of groups. (JEL D71, D81)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.96.4.1321
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 96 (2006)
Issue (Month): 4 (September)
Pages: 1321-1332

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Handle: RePEc:aea:aecrev:v:96:y:2006:i:4:p:1321-1332
Note: DOI: 10.1257/aer.96.4.1321
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