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When Do Groups Perform Better than Individuals? A Company Takeover Experiment

Quaderni DSE Working Paper No. 763

53 Pages Posted: 27 Jun 2011  

Marco Casari

University of Bologna - Department of Economics

Jingjing Zhang

University of Zurich, Department of Economics

Christine Jackson

Purdue University

Multiple version iconThere are 2 versions of this paper

Date Written: June 22, 2011

Abstract

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.

Keywords: winner's curse, takeover game, group decision making, communication, experiments

JEL Classification: C91, C92, D03, D81

Suggested Citation

Casari, Marco and Zhang, Jingjing and Jackson, Christine, When Do Groups Perform Better than Individuals? A Company Takeover Experiment (June 22, 2011). Quaderni DSE Working Paper No. 763. Available at SSRN: https://ssrn.com/abstract=1873267 or http://dx.doi.org/10.2139/ssrn.1873267

Marco Casari (Contact Author)

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy

Jingjing Zhang

University of Zurich, Department of Economics ( email )

Zuerich, 8006
Switzerland

HOME PAGE: http://www.econ.uzh.ch/faculty/zhang.html

Christine Jackson

Purdue University ( email )

610 Purdue Mall
West Lafayette, IN 47907
United States

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