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Sequential decision-making with group identity

Jessica Van Parys () and Elliott Ash

Journal of Economic Psychology, 2018, vol. 69, issue C, 1-18

Abstract: In sequential decision-making experiments, participants often conform to the decisions of others rather than reveal private information – resulting in less information produced and potentially lower payoffs for the group. This paper asks whether experimentally induced group identity affects players’ decisions to conform, even when payoffs are only a function of individual actions. As motivation for the experiment, we show that U.S. Supreme Court Justices in preliminary hearings are more likely to conform to their same-party predecessors when the share of predecessors from their party is high. Lab players, in turn, are more likely to conform to the decisions of in-group members when their share of in-group predecessors is high. We find that exposure to information from in-group members increases the probability of reverse information cascades (herding on the wrong choice), reducing average payoffs. Therefore, alternating decision-making across members of different groups may improve welfare in sequential decision-making contexts.

Keywords: Social identity; Information cascades; Herd behavior (search for similar items in EconPapers)
JEL-codes: C91 D82 D83 D84 (search for similar items in EconPapers)
Date: 2018
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