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Risk taking and information aggregation in groups

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  • Bougheas, Spiro
  • Nieboer, Jeroen
  • Sefton, Martin

Abstract

We report a controlled laboratory experiment examining risk-taking and information aggregation in groups facing a common risk. The experiment allows us to examine how subjects respond to new information, in the form of both privately observed signals and signals reported from others. We find that a considerable number of subjects exhibit ‘reverse confirmation bias’: they place less weight on information from others that agrees with their private signal and more weight on conflicting information. We also find a striking degree of consensus when subjects make decisions on behalf of the group under a random dictatorship procedure. Reverse confirmation bias and the incidence of consensus are considerably reduced when group members can share signals but not communicate.

Suggested Citation

  • Bougheas, Spiro & Nieboer, Jeroen & Sefton, Martin, 2015. "Risk taking and information aggregation in groups," LSE Research Online Documents on Economics 64085, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:64085
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    File URL: http://eprints.lse.ac.uk/64085/
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    Cited by:

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    2. Marcel Fafchamps & Di Mo, 2018. "Peer effects in computer assisted learning: evidence from a randomized experiment," Experimental Economics, Springer;Economic Science Association, vol. 21(2), pages 355-382, June.

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    More about this item

    Keywords

    Group behaviour; teams; decision making; risk; experiment; ES/H014691/1;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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