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Group-Shift and the Consensus Effect, Second Version

Author

Listed:
  • David Dillenberger

    (Department of Economics, University of Pennsylvania)

  • Colin Raymond

    (Department of Economics, Amherst University)

Abstract

Individuals often tend to conform to the choices of others in group decisions, compared to choices made in isolation, giving rise to phenomena such as group polarization and the bandwagon effect. We show that this behavior, which we term the consensus effect, is equivalent to a well-known violation of expected utility, namely strict quasi-convexity of preferences. In contrast to the equilibrium outcome when individuals are expected utility maximizers, quasi-convexity of preferences imply that group decisions may fail to properly aggregate preferences and strictly Pareto-dominated equilibria may arise. Moreover, these problems become more severe as the size of the group grows.

Suggested Citation

  • David Dillenberger & Colin Raymond, 2016. "Group-Shift and the Consensus Effect, Second Version," PIER Working Paper Archive 16-015, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 30 Sep 2016.
    • Handle: RePEc:pen:papers:16-015
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    References listed on IDEAS

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    More about this item

    Keywords

    Aggregation of Preferences; Choice Shifts in Groups; Consensus Effect; Non-Expected Utility; Quasi-Convex Preferences;
    All these keywords.

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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