An Experiment on Democratic Versus Dictatorial Collective Decision Making

We report on an experiment that tests for the effects of democratic versus hierarchical rules for joint decision making in organizations, like companies, which operate in a competitive environment. While discussion improves outcomes via an effect on public goods contributions, we find that there is no difference between the decisions made under democracy and those made under hierarchy: an institutional version of the Modigliani-Miller theorem. The wisdom of crowd effect benefiting democratic organizations is counterbalanced by a greater attention paid by the manager in hierarchical organizations to the price decision, which we call the attention responsibility effect.

Keywords: democracy, hierarchy, organizational structure, Bertrand, chat, advice

JEL Classification: C72, C91, C92, D43, H41

Suggested Citation: Suggested Citation

Hargreaves Heap, Shaun and Tsutsui, Kei and Zizzo, Daniel John, An Experiment on Democratic Versus Dictatorial Collective Decision Making (July 17, 2015). Available at SSRN: https://ssrn.com/abstract=2631985 or http://dx.doi.org/10.2139/ssrn.2631985