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When Experience Meets Description: How Dyads Integrate Experiential and Descriptive Information in Risky Decisions

Author

Listed:
  • Tomás Lejarraga

    () (Center for Adaptive Rationality, Max Planck Institute for Human Development, 14195 Berlin, Germany)

  • Johannes Müller-Trede

    () (Rady School of Management, University of California, San Diego, La Jolla, California 92093)

Abstract

How do teams make joint decisions under risk when some team members learn about a prospect from description and others learn from experience? In a series of experiments, we find that two-person teams composed of one participant who learns from description and a second participant who learns from experience arrive at shared decisions via mutual concessions. In doing so, they attenuate individual biases, such as the overweighting and underweighting of the probability of rare events. The social interaction thus leads dyads to make shared decisions that follow normative standards more closely than the decisions made by individual decision makers. Finally, in processing experiential information, dyads appear to be sensitive to the reliability of the experience: the more reliable the experiential information, the larger its influence on the dyad’s decision.

Suggested Citation

  • Tomás Lejarraga & Johannes Müller-Trede, 2017. "When Experience Meets Description: How Dyads Integrate Experiential and Descriptive Information in Risky Decisions," Management Science, INFORMS, vol. 63(6), pages 1953-1971, June.
  • Handle: RePEc:inm:ormnsc:v:63:y:2017:i:6:p:1953-1971
    DOI: 10.1287/mnsc.2016.2428
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    File URL: https://doi.org/10.1287/mnsc.2016.2428
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    References listed on IDEAS

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