Strategic Expert Committees and the Markets That Assess Them: A Laboratory Experiment

Committees of experts are widely used to make decisions. We experimentally investigate the relationship between decision making in committees and the assessment of the ability of committee members by evaluators, comparing observed behavior with theoretical predictions. Treatments vary in whether members care only about a state-dependent project payoff or also about assessments and whether evaluators can base their assessments only on the decision the committee makes or also on cheap-talk statements made by committee members on their confidence in the committee decision. Evidence for the equilibrium predictions is mixed; for example, contrary to theory, committees with a concern for their assessment do not distort their decisions more than committees without, whereas in line with theory, evaluators give higher assessments to committees that take the risky decision rather than the riskless. We analyze whether evaluators rationally base their assessments on observed behavior of committees using an orthogonality test. In treatments with cheap-talk statements, assessments are quite rational; in treatments without, they are too low on average. We investigate whether committees best reply to expected project payoffs and, in treatments in which members’ payoffs also depend on assessments, to predicted assessments conditional on observed committee behavior. In all treatments, committees respond to the possibilities to raise expected payoffs but do not use them as much as predicted by theory. We conclude by showing that the amount of information about committee members’ abilities that ends up in assessments is considerably larger when evaluators observe committees’ decisions and statements rather than only decisions.