Hierarchies and decision-making in groups: Experimental evidence

In this study, I investigate differences in decision-making outcomes for groups under different hierarchies using an experimental approach. Many decisions in firms, households, and other contexts are not taken by individuals, but by groups. In addition, most groups, especially in firms, are characterized by hierarchical organization structures. While research in management, sociology and psychology has been investigating the role of hierarchies for a long time, there is a lack of experimental economic research on the effect of various group structures or hierarchies on decision-making and its quality. I compare the choices of groups in Holt and Laury (2002) type lottery choices and in intellective tasks in five different group types: a group without hierarchy, a hierarchy by age (where the oldest group member decides), by merit (where the winner in a financial literacy quiz decides), by chance (where a randomly determined leader decides) and by election (where an elected leader decides). Experimental results suggest that there are no differences in the number of safe choices between the different hierarchy types. However, groups with a leader assigned on the basis of merit perform better in intellective tasks.