Group-Shift and the Consensus Effect

40 Pages Posted: 2 Mar 2016 Last revised: 15 Mar 2016

See all articles by David Dillenberger

David Dillenberger

University of Pennsylvania - Department of Economics

Collin Raymond

Amherst College

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2016

Abstract

[It is well documented that individuals make different choices in the context of group decisions, such as elections, from choices made in isolation. In particular, individuals tend to conform to the decisions of others -- a property we call the consensus effect -- which in turn implies phenomena such as group polarization and the bandwagon effect. We show that the consensus effect is equivalent to a well-known violation of expected utility, namely strict quasi-convexity of preferences. Our results qualify and extend those of Eliaz, Ray and Razin (2006), who focus on choice-shifts in group when one option is safe (i.e., a degenerate lottery). In contrast to the equilibrium outcome when individuals are expected utility maximizers, the consensus effect implies that group decisions may fail to properly aggregate preferences in strategic contexts and strictly Pareto-dominated equilibria may arise. Moreover, these problems become more severe as the size of the group grows.

Keywords: Aggregation of Preferences, Choice Shifts in Groups, Consensus Effect, Non-expected Utility

JEL Classification: D71, D81

Suggested Citation

Dillenberger, David and Raymond, Collin, Group-Shift and the Consensus Effect (March 1, 2016). PIER Working Paper No. 16-005. Available at SSRN: https://ssrn.com/abstract=2739786 or http://dx.doi.org/10.2139/ssrn.2739786

David Dillenberger (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States
215-898-1503 (Phone)

Collin Raymond

Amherst College ( email )

P.O. Box 5000
Amherst, MA 01002-5000
United States

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