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Are Two Heads Better Than One?: An Experimental Analysis of Group vs. Individual Decisionmaking

Author

Listed:
  • Alan S. Blinder

    (Princeton University)

  • John Morgan

    (Princeton University)

Abstract

We report the results of two sets of experiments comparing decisions made as individuals to those made in groups under majority and unanimity rule. The first setup posed a purely statistical problem devoid of any economic content: Subjects were asked to guess the composition of an (electronic) urn filled with blue balls and red balls. The second mimicked the problem faced by central bankers: Subjects were asked to steer an (electronic model of an) economy by manipulating the interest rate. The results were both striking and strikingly consistent. Neither experiment supported the commonly-held belief that groups make decisions more slowly than individuals. Both experiments found that groups, on average, made better decisions than individuals. Surprisingly, groups outperformed individuals by almost exactly the same margin in each experiment. Finally, there were practically no differences between group decisions made by majority rule and group decisions made under a unanimity requirement.

Suggested Citation

  • Alan S. Blinder & John Morgan, 2001. "Are Two Heads Better Than One?: An Experimental Analysis of Group vs. Individual Decisionmaking," Working Papers 130, Princeton University, Department of Economics, Center for Economic Policy Studies..
    • Handle: RePEc:pri:cepsud:70
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    References listed on IDEAS

    as
    1. Glenn Rudebusch & Lars E.O. Svensson, 1999. "Policy Rules for Inflation Targeting," NBER Chapters, in: Monetary Policy Rules, pages 203-262, National Bureau of Economic Research, Inc.
    2. Laurence Ball, 1999. "Efficient Rules for Monetary Policy," International Finance, Wiley Blackwell, vol. 2(1), pages 63-83, April.
    3. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1, January.
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    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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