The Power of Commitment in Group Search

58 Pages Posted: 19 Aug 2019 Last revised: 14 Jan 2023

See all articles by Xinyu Cao

Xinyu Cao

Department of Marketing, CUHK Business School

Yuting Zhu

National University of Singapore

Date Written: January 14, 2023

Abstract

In this paper, we build a two-member two-period model to show that when a group of
people with different preferences conduct search and make a decision using the majority
voting rule, they can benefit from making a commitment on the number of products to
search ex ante (i.e., conducting fixed-sample search) when the search cost is small enough
or relatively large. The underlying mechanism is that, because of the preference inconsistency between group members, they tend to search fewer products and thus have lower
expected utility in group search than in single-agent search, and making a commitment
on the number of products to search helps mitigate the preference inconsistency problem
in group search, especially when the search cost is small enough or relatively large. We
further show that under alternative voting rules, there also exist ranges of search cost in
which fixed-sample search works better than sequential search as long as the voting rule is
exogenously determined. If the group can endogenously choose the voting rule that maximizes their expected utility, then sequential search is always preferable to fixed-sample
search. We also consider several extensions to show the robustness of our finding.

Keywords: Search, Group Decision, Preference Inconsistency, Commitment

Suggested Citation

Cao, Xinyu and Zhu, Yuting, The Power of Commitment in Group Search (January 14, 2023). NYU Stern School of Business, Available at SSRN: https://ssrn.com/abstract=3437993 or http://dx.doi.org/10.2139/ssrn.3437993

Xinyu Cao (Contact Author)

Department of Marketing, CUHK Business School ( email )

Yuting Zhu

National University of Singapore ( email )

15 Kent Ridge Dr
BIZ 1 8-14
Singapore, 119245

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