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A Decision-Theoretic Basis for Choice Shifts in Groups

Author

Listed:
  • Eliaz, Kfir
  • Ray, Debraj
  • Razin, Ronny

Abstract

The phenomenon of choice shifts in group decision-making is fairly ubiquitous in the social psychology literature. Faced with a choice between a ‘safe’ and ‘risky’ decision, group members appear to move to one extreme or the other, relative to the choices each member might have made alone. Both risky and cautious shifts have been identified in different situations. This Paper demonstrates that from an individual decision-making perspective, choice shifts may be viewed as a systematic violation of expected utility theory. We propose a model in which a well-known failure of expected utility – captured by the Allais paradox – is equivalent to a particular configuration of choice shifts. Thus, our results imply a connection between two well-known behavioural regularities, one in individual decision theory and another in the social psychology of groups.

Suggested Citation

  • Eliaz, Kfir & Ray, Debraj & Razin, Ronny, 2004. "A Decision-Theoretic Basis for Choice Shifts in Groups," CEPR Discussion Papers 4423, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4423
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    Cited by:

    1. Otto H. Swank & Bauke Visser, 2007. "Is Transparency to no avail? Committee Decision-making, Pre-meetings, and Credible Deals," Tinbergen Institute Discussion Papers 07-055/1, Tinbergen Institute.

    More about this item

    Keywords

    Allias paradox; cautious shift; choice shifts; group decision-making; risky shift;

    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

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