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Do groups fall prey to the winner's curse?


Casari, Marco; Zhang, Jingjing; Jackson, Christine (2010). Do groups fall prey to the winner's curse? Working paper series / Institute for Empirical Research in Economics No. 504, University of Zurich.

Abstract

In a company takeover experiment, groups placed better bids than individuals and substantially reduced the winner’s curse. This improvement was mostly due to peer pressure over the minority opinion and to group learning. Learning took place from interacting and negotiating consensus with others, not simply from observing their bids. When there was disagreement within a group,nwhat prevailed was not the best proposal but the one of the majority. Groups underperformednwith respect to a “truth wins” benchmark although they outperformed individuals deciding in isolation. We draw general lessons about when to employ groups instead of individuals in intellectual tasks.

Abstract

In a company takeover experiment, groups placed better bids than individuals and substantially reduced the winner’s curse. This improvement was mostly due to peer pressure over the minority opinion and to group learning. Learning took place from interacting and negotiating consensus with others, not simply from observing their bids. When there was disagreement within a group,nwhat prevailed was not the best proposal but the one of the majority. Groups underperformednwith respect to a “truth wins” benchmark although they outperformed individuals deciding in isolation. We draw general lessons about when to employ groups instead of individuals in intellectual tasks.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Institute for Empirical Research in Economics (former)
Dewey Decimal Classification:330 Economics
Language:English
Date:September 2010
Deposited On:29 Nov 2011 15:09
Last Modified:12 Aug 2017 12:41
Series Name:Working paper series / Institute for Empirical Research in Economics
ISSN:1424-0459
Official URL:http://www.econ.uzh.ch/wp.html

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