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Over-Caution of Large Committees of Experts

  • Rune Midjord
  • Tomás Rodríguez Barraquer
  • Justin Mattias Valasek
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    In this paper, we consider a committee of experts that decides whether to approve or reject a proposed innovation on behalf of society. In addition to a payoff linked to the adequateness of the committee’s decision, each expert receives a disesteem payoff if he/she voted in favor of an ill-fated innovation. An example is FDA committees, where committee members can be exposed to a disesteem payoff (negative) if they vote to pass a drug that proves to be fatal for some users. Under the standard voting model, we show that information is aggregated in large committees provided disesteem payoffs are not overly large. However, we go on to document an empirically-relevant discontinuity in the standard model: if an arbitrarily large number of signals does not perfectly reflect the state of the world then, no matter how small the disesteem payoffs are, information aggregation fails in large committees and the committee rejects the innovation almost surely, providing an explanation for over-caution in committees.

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    File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2014/wp-cesifo-2014-05/cesifo1_wp4810.pdf
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    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4810.

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    Date of creation: 2014
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    Handle: RePEc:ces:ceswps:_4810
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    1. Ottaviani, Marco & Sorensen, Peter, 2001. "Information aggregation in debate: who should speak first?," Journal of Public Economics, Elsevier, vol. 81(3), pages 393-421, September.
    2. Kiel, Alexandra & Gerling, Kerstin & Schulte, Elisabeth & Grüner, Hans Peter, 2003. "Information acquisition and decision making in committees: a survey," Working Paper Series 0256, European Central Bank.
    3. John Morgan & Felix Várdy, 2012. "Mixed Motives and the Optimal Size of Voting Bodies," Journal of Political Economy, University of Chicago Press, vol. 120(5), pages 986 - 1026.
    4. Bezalel Peleg & Shmuel Zamir, 2012. "Extending the Condorcet Jury Theorem to a general dependent jury," Social Choice and Welfare, Springer, vol. 39(1), pages 91-125, June.
    5. Tore Ellingsen & Magnus Johannesson, 2008. "Pride and Prejudice: The Human Side of Incentive Theory," American Economic Review, American Economic Association, vol. 98(3), pages 990-1008, June.
    6. Callander, Steven, 2008. "Majority rule when voters like to win," Games and Economic Behavior, Elsevier, vol. 64(2), pages 393-420, November.
    7. Li Hao & Wing Suen, 2009. "Viewpoint: Decision-making in committees," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 359-392, May.
    8. Brennan, Geoffrey & Pettit, Philip, 2004. "The Economy of Esteem: An Essay on Civil and Political Society," OUP Catalogue, Oxford University Press, number 9780199246489, March.
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