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A Theory of Conservatism

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  • Hao Li

Abstract

A free-rider problem arises when a group choice between two alternatives has to be made on the basis of privately collected evidence, leading to insufficient effort in gathering evidence and an ex ante welfare loss for the group. To alleviate the free-rider problem, the group can commit to a "conservative" rule, whereby the decision is made against the alternative favored by the group's preference or prior when evidence supports it but is not preponderant. Optimal conservatism increases private incentives to gather evidence and improves the quality of the group decision. My result explains why sometimes groups appear overly cautious toward favored alternatives.

Suggested Citation

  • Hao Li, 2001. "A Theory of Conservatism," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 617-636, June.
  • Handle: RePEc:ucp:jpolec:v:109:y:2001:i:3:p:617-636
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    References listed on IDEAS

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    1. Dearden, James & Ickes, Barry W & Samuelson, Larry, 1990. "To Innovate or Not to Innovate: Incentives and Innovation in Hierarchies," American Economic Review, American Economic Association, vol. 80(5), pages 1105-1124, December.
    2. Richard J. Gilbert & Paul Klemperer, 2000. "An Equilibrium Theory of Rationing," RAND Journal of Economics, The RAND Corporation, pages 1-21.
    3. Prendergast, Canice, 1993. "A Theory of "Yes Men."," American Economic Review, American Economic Association, vol. 83(4), pages 757-770, September.
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