Over-Caution of Large Committees of Experts
42 Pages Posted: 2 Jan 2013 Last revised: 8 Oct 2013
Date Written: October 5, 2013
In this paper, we provide an explanation for why committees may behave over-cautiously. A committee of experts must decide whether to approve or reject a proposed innovation on behalf of "society." Each expert's private signal is a noisy version of what the "state of the art science" would suggest as the correct decision. In addition to a payoff linked to the adequateness of the committee's decision, each expert receives a disesteem payoff if he/she voted in favor of an ill-fated innovation. An example is FDA committees, where committee members can be exposed to a disesteem (negative) payoff if they vote to pass a drug that proves to be fatal for some users. We show that no matter how small the disesteem payoffs are, information aggregation fails in large committees: under any majority rule, the committee rejects the innovation almost surely. This inefficiency is robust to pre-vote information pooling unless the decision is taken under unanimity whereby the experts' preferences become homogenous.
Keywords: Committees, Information aggregation, Disesteem payoffs
JEL Classification: D71, D72
Suggested Citation: Suggested Citation