Committees and Decision Making

Abstract

We study the interactions and strategies of economic agents within a business committee to better understand how decisions are made in an important group setting. Specifically, we study the Federal Reserve’s Federal Open Market Committee (FOMC) monetary policy actions and meeting transcripts to understand how the committee members discussion impacts the chosen monetary policy. The results show that after controlling for the impact of macroeconomic variables related to the Federal Reserve’s dual mandate and past policy actions, variables which measure members efforts in interpreting the current economic data and persuading other members through cognitive and affective persuasion strategies have economically and statistically significant effect on the meeting outcomes. The implication is that for a business committee to arrive at a group decision, the members need to digest/interpret the relevant information, spend time persuading other members using logic/emotion in order to aggregate member viewpoints to a consensus decision. Thus, the interpretation processes and persuasion methods that are used within a committee discussion have a non-trivial impact on the final outcome.

Keywords: Committee Decisions, Group Decisions, Text Analysis, Information Interpretation, Cognitive Persuasion, Affective Persuasion

JEL Classification: M1, E5, E52, E58