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Who follows the crowd—Groups or individuals?

  • Fahr, René
  • Irlenbusch, Bernd

In games of social learning individuals tend to give too much weight to their own private information relative to the information that is conveyed by the choices of others (Weizsäcker, 2010). In this paper we investigate differences between individuals and small groups as decision makers in information cascade situations. In line with results from social psychology as well as results on Bayesian decision making (Charness et al., 2006) we find that groups behave more rationally than individuals. Groups, in particular, are able to abandon their own private signals more often than individuals when it is rational to do so. Our results indicate that the intellective part of the decision task contributes slightly more to the superior performance of groups than the judgmental part. Our findings have potential implications for the design of decision making processes in organisations, finance and other economic settings.

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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 80 (2011)
Issue (Month): 1 ()
Pages: 200-209

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Handle: RePEc:eee:jeborg:v:80:y:2011:i:1:p:200-209
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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