Over-Caution of Large Committees of Experts

42 Pages Posted: 2 Jan 2013 Last revised: 8 Oct 2013

See all articles by Rune Midjord

Rune Midjord

Copenhagen Business School

Tomás Rodríguez Barraquer

Universidad de los Andes

Justin Valasek

Norwegian School of Economics (NHH)

Multiple version iconThere are 2 versions of this paper

Date Written: October 5, 2013

Abstract

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

Midjord, Rune and Rodríguez Barraquer, Tomás and Valasek, Justin, Over-Caution of Large Committees of Experts (October 5, 2013). Available at SSRN: https://ssrn.com/abstract=2195673 or http://dx.doi.org/10.2139/ssrn.2195673

Rune Midjord (Contact Author)

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Tomás Rodríguez Barraquer

Universidad de los Andes ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia

Justin Valasek

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway

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