Synchronization in human decision making

Yi-Fang Liu (), Jørgen Vitting Andersen (), Maxime Frolov () and Philippe de Peretti ()
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Yi-Fang Liu: College of Management and Economics - Tianjin University
Jørgen Vitting Andersen: Centre d'Economie de la Sorbonne, https://centredeconomiesorbonne.univ-paris1.fr
Maxime Frolov: Centre d'Economie de la Sorbonne, https://centredeconomiesorbonne.univ-paris1.fr
Philippe de Peretti: Centre d'Economie de la Sorbonne, https://centredeconomiesorbonne.univ-paris1.fr

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: Just like soldiers crossing a bridge in sync can lead to a catastrophic failure, we show via experiments, theory, and simulations, how synchronization in human decision making can lead to extreme outcomes. Individual decision making and risk taking are well known to be gender dependent. Much less is however understood about gender's impact on the creation of collective risk through aggregate decision making, where the decision of one individual can affect the decision making of other individuals, eventually leading to synchronization in behavior. To study the formation of collective risk created due to synchronization in human decision making, we have devised a series of experiments that can be analyzed and understood within a game theoretical framework. In the experiments each individual in groups of either men or women decide to buy or sell a financial asset based on an information set containing past price behavior. Risk can be generated collectively through coordination in the aggregate decision making, which leads to a price formation far from the fundamental value of the asset. Here we show how collective risks can be generated in groups of both genders, but the pathway to formation of collective risks happens through an individual risk taking which are different for groups composed of men respectively women. A priori we find that it is impossible to know whether a given group will engage in the formation of collective risk, but via a fluctuation based game theoretical framework we are able to estimate the likelihood that it will happen. Our results highlight some of the foundations for creation of excessive collective risks relevant for example in the understanding of financial systemic risks

Keywords: collective decision making; synchronization; agent based modeling (search for similar items in EconPapers)
JEL-codes: G1 G12 G14 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2016-03
New Economics Papers: this item is included in nep-cdm, nep-cmp, nep-exp and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:16035

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