IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Risk Taking and Information Aggregation in Groups

Listed author(s):
  • Spiros Bougheas

    ()

    (School of Economics, University of Nottingham)

  • Jeroen Nieboerr

    ()

    (Department of Social Policy, London School of Economics and Political Science)

  • Martin Sefton

    ()

    (School of Economics, University of Nottingham)

We report an experiment examining risk taking and information aggregation in groups. Group members come to the table with an individual preference for a choice under risk, based on privately received information, and can share this information with fellow group members. They then make a decision under risk on behalf of the group using a random dictatorship mechanism, as well as an individual decision. Our analysis reveals that, while the behavior of many subjects is consistent with Bayesian rationality, a considerable number of subjects exhibited ‘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 observe a striking degree of consensus: in most groups all members made the same choice on behalf of the group. The pattern of individual choices after group deliberation suggests that the high degree of group consensus is due to persuasive arguments of other group members.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nottingham.ac.uk/cedex/documents/papers/cedex-discussion-paper-2014-09.pdf
Download Restriction: no

Paper provided by The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham in its series Discussion Papers with number 2014-09.

as
in new window

Length:
Date of creation: Sep 2014
Handle: RePEc:not:notcdx:2014-09
Contact details of provider: Postal:
School of Economics University of Nottingham University Park Nottingham NG7 2RD

Phone: (44) 0115 951 5620
Fax: (0115) 951 4159
Web page: http://www.nottingham.ac.uk/economics/cedex/

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Amrei M. Lahno & Marta Serra-Garcia, 2012. "Peer Effects in Risk Taking," CESifo Working Paper Series 4057, CESifo Group Munich.
  2. Ronald J. Baker II & Susan K. Laury & Arlington W. Williams, 2008. "Comparing Small-Group and Individual Behavior in Lottery-Choice Experiments," Southern Economic Journal, Southern Economic Association, vol. 75(2), pages 367-382, October.
  3. Sutter, Matthias, 2007. "Are teams prone to myopic loss aversion? An experimental study on individual versus team investment behavior," Economics Letters, Elsevier, vol. 97(2), pages 128-132, November.
  4. Cooper, David J. & Rege, Mari, 2011. "Misery loves company: Social regret and social interaction effects in choices under risk and uncertainty," Games and Economic Behavior, Elsevier, vol. 73(1), pages 91-110, September.
  5. Bougheas, Spiros & Nieboer, Jeroen & Sefton, Martin, 2013. "Risk-taking in social settings: Group and peer effects," Journal of Economic Behavior & Organization, Elsevier, vol. 92(C), pages 273-283.
  6. Jingjing Zhang & Marco Casari, 2012. "How Groups Reach Agreement In Risky Choices: An Experiment," Economic Inquiry, Western Economic Association International, vol. 50(2), pages 502-515, 04.
  7. Uri Gneezy & Jan Potters, 1997. "An Experiment on Risk Taking and Evaluation Periods," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 631-645.
  8. S. Nageeb Ali & Jacob K. Goeree & Navin Kartik & Thomas R. Palfrey, 2008. "Information Aggregation in Standing and Ad Hoc Committees," American Economic Review, American Economic Association, vol. 98(2), pages 181-186, May.
  9. Matthias Sutter, 2009. "Individual Behavior and Group Membership: Comment," American Economic Review, American Economic Association, vol. 99(5), pages 2247-2257, December.
  10. Jeroen Nieboer, 2013. "Risk taking in diverse groups: Gender matters," Discussion Papers 2013-06, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  11. RobertS. Shupp & ArlingtonW. Williams, 2008. "Risk preference differentials of small groups and individuals," Economic Journal, Royal Economic Society, vol. 118(525), pages 258-283, 01.
  12. Laughlin, Patrick R., 1999. "Collective Induction: Twelve Postulates," Organizational Behavior and Human Decision Processes, Elsevier, vol. 80(1), pages 50-69, October.
  13. Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutström & Marcela Tarazona-Gómez, 2013. "Preferences over social risk," Oxford Economic Papers, Oxford University Press, vol. 65(1), pages 25-46, January.
  14. McKelvey, Richard D & Page, Talbot, 1990. "Public and Private Information: An Experimental Study of Information Pooling," Econometrica, Econometric Society, vol. 58(6), pages 1321-1339, November.
  15. Ertac, Seda & Gurdal, Mehmet Y., 2012. "Deciding to decide: Gender, leadership and risk-taking in groups," Journal of Economic Behavior & Organization, Elsevier, vol. 83(1), pages 24-30.
  16. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
  17. Masclet, David & Colombier, Nathalie & Denant-Boemont, Laurent & Lohéac, Youenn, 2009. "Group and individual risk preferences: A lottery-choice experiment with self-employed and salaried workers," Journal of Economic Behavior & Organization, Elsevier, vol. 70(3), pages 470-484, June.
  18. Sobel, Joel, 2014. "On the relationship between individual and group decisions," Theoretical Economics, Econometric Society, vol. 9(1), January.
  19. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
  20. Lahno, Amrei M. & Serra-Garcia, Marta, 2012. "Peer Effects in Risk Taking," Discussion Papers in Economics 14309, University of Munich, Department of Economics.
  21. Gary Charness & Edi Karni & Dan Levin, 2007. "Individual and group decision making under risk: An experimental study of Bayesian updating and violations of first-order stochastic dominance," Journal of Risk and Uncertainty, Springer, vol. 35(2), pages 129-148, October.
  22. Blinder, Alan S & Morgan, John, 2005. "Are Two Heads Better than One? Monetary Policy by Committee," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(5), pages 789-811, October.
  23. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
  24. Joel Sobel, 2014. "On the relationship between individual and group decisions," Levine's Working Paper Archive 786969000000000950, David K. Levine.
  25. Jacob K. Goeree & Leeat Yariv, 2011. "An Experimental Study of Collective Deliberation," Econometrica, Econometric Society, vol. 79(3), pages 893-921, 05.
  26. Anderson, Lisa R & Holt, Charles A, 1997. "Information Cascades in the Laboratory," American Economic Review, American Economic Association, vol. 87(5), pages 847-862, December.
  27. Eldad Yechiam & Meir Druyan & Eyal Ert, 2008. "Observing others' behavior and risk taking in decisions from experience," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 3(7), pages 493-500, October.
  28. Nieboer, Jeroen, 2015. "Group member characteristics and risk taking by consensus," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 57(C), pages 81-88.
  29. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
  30. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:not:notcdx:2014-09. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Suzanne Robey)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.