Group-Shift and the Consensus Effect

40 Pages Posted: 8 Oct 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: September 30, 2016

Abstract

Individuals often tend to conform to the choices of others in group decisions, compared to choices made in isolation, giving rise to phenomena such as group polarization and the bandwagon effect. We show that this behavior, which we term the consensus effect, is equivalent to a well-known violation of expected utility, namely strict quasi-convexity of preferences. In contrast to the equilibrium outcome when individuals are expected utility maximizers, quasi-convexity of preferences imply that group decisions may fail to properly aggregate preferences 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, Quasi-Convex Preferences

JEL Classification: D71, D81

Suggested Citation

Dillenberger, David and Raymond, Collin, Group-Shift and the Consensus Effect (September 30, 2016). PIER Working Paper No. 16-015. Available at SSRN: https://ssrn.com/abstract=2849461 or http://dx.doi.org/10.2139/ssrn.2849461

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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