Learning While Voting: Determinants of Collective Experimentation
This paper analyzes collective decision making when individual preferences evolve through learning.� Votes are affected by their anticipated effect on future preferences.� The analysis is conducted in a two-arm bandit model with a safe alternative and a risky alternative whose payoff distribution, or "type", varies across individuals and may be learned through experimentation.� Society is shown to experiment less than any of its members would if he could dictate future decisions, and to be systematically biased against experimentation compared to the utilitarian optimum.� Control sharing can even result in negative value of experimentation: society may shun a risky alternative even its expected payoff is higher than the safe one's.� Commitment to a fixed alternative can only increase efficiency if aggregate uncertainty is small enough.� Even when types are independent, a positive news shock for anyone raises everyone's incentive to experiment.� Ex ante preference correlation or heterogeneity reduces these inefficiencies.
|Date of creation:||01 May 2008|
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