When Do Groups Perform Better than Individuals? A Company Takeover Experiment
It is still an open question when groups will perform better than individuals in intellectual tasks. We report that in a company takeover experiment, groups placed better bids than individuals and substantially reduced the winner’s curse. This improvement was mostly due to peer pressure over the minority opinion and to group learning. Learning took place from interacting and negotiating consensus with others, not simply from observing their bids. When there was disagreement within a group, what prevailed was not the best proposal but the one of the majority. Groups underperformed with respect to a “truth wins” benchmark although they outperformed individuals deciding in isolation.
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- Reinhard Selten & Klaus Abbink & Ricarda Cox, 2001.
"Learning Direction Theory and the Winner’s Curse,"
Bonn Econ Discussion Papers
bgse10_2001, University of Bonn, Germany.
- Reinhard Selten & Klaus Abbink & Ricarda Cox, 2005. "Learning Direction Theory and the Winnerâ€™s Curse," Experimental Economics, Springer, vol. 8(1), pages 5-20, April.
- Ball, Sheryl B. & Bazerman, Max H. & Carroll, John S., 1991. "An evaluation of learning in the bilateral winner's curse," Organizational Behavior and Human Decision Processes, Elsevier, vol. 48(1), pages 1-22, February.
- Brit Grosskopf & Yoella Bereby-Meyer & Max Bazerman, 2007. "On the Robustness of the Winnerâ€™s Curse Phenomenon," Theory and Decision, Springer, vol. 63(4), pages 389-418, December.
- Holt, Charles A & Sherman, Roger, 1994. "The Loser's Curse," American Economic Review, American Economic Association, vol. 84(3), pages 642-52, June.
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