When Do Groups Perform Better than Individuals? A Company Takeover Experiment
University of Bologna - Department of Economics
University of Zurich, Department of Economics
June 22, 2011
Quaderni DSE Working Paper No. 763
It is still an open question when groups will perform better than individuals in intellectual tasks. We report that 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, what prevailed was not the best proposal but the one of the majority. Groups underperformed with respect to a “truth wins” benchmark although they outperformed individuals deciding in isolation.
Number of Pages in PDF File: 53
Keywords: winner's curse, takeover game, group decision making, communication, experiments
JEL Classification: C91, C92, D03, D81working papers series
Date posted: June 27, 2011
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