Choice Shifts in Groups: A Decision-Theoretic Basis

Kfir Eliaz, Debraj Ray and Ronny Razin

American Economic Review, 2006, vol. 96, issue 4, 1321-1332

Abstract: The phenomenon of choice shifts in group decision-making has received attention in the social psychology literature. Faced with a risky group decision, individuals appear to support more extreme choices relative to those they would make on their own. This paper demonstrates that from a decision-theoretic perspective, choice shifts are intimately connected to failures of expected utility theory. In the model studied here, the Allais paradox is equivalent to a well-studied configuration of choice shifts. Thus, our results marry two well-known behavioral regularities, one in individual decision theory and another in the social psychology of groups. (JEL D71, D81)

Date: 2006
Note: DOI: 10.1257/aer.96.4.1321
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