An Experiment on Democratic Versus Dictatorial Collective Decision Making

60 Pages Posted: 18 Jul 2015

See all articles by Shaun P. Hargreaves Heap

Shaun P. Hargreaves Heap

University of East Anglia (UEA) - School of Economic and Social Studies

Kei Tsutsui

University of Bath - Department of Economics

Daniel John Zizzo

University of Queensland - School of Economics

Date Written: July 17, 2015

Abstract

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

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

Shaun Hargreaves Heap

University of East Anglia (UEA) - School of Economic and Social Studies ( email )

Norwich, Norfolk NR4 7TJ
United Kingdom
+44 (0)1603 593417 (Phone)

HOME PAGE: http://www.uea.ac.uk/soc/econ/people/hargreavesheap_s.shtml

Kei Tsutsui

University of Bath - Department of Economics ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom
01255 38 6402 (Phone)

HOME PAGE: http://www.bath.ac.uk/economics/staff/kei-tsutsui/

Daniel John Zizzo (Contact Author)

University of Queensland - School of Economics ( email )

St Lucia
Brisbane, Queensland 4072
Australia

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