When Do Groups Perform Better Than Individuals? A Company Takeover Experiment
University of Zurich Working Paper No. 504
45 Pages Posted: 9 Sep 2010 Last revised: 9 May 2012
Date Written: April 2012
It is still an open question when groups 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 learning. Learning took place from interacting and negotiating consensus with others, not simply from observing their bids. When there was disagreement, 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.
Keywords: Winner’s curse, takeover game, group decision making, communication, experiments
JEL Classification: C91, C92, D03, D81
Suggested Citation: Suggested Citation