Individual vs. group decision making in economics

In economics the `decision maker` is usually modeled as an individual. However, in many real-life situations the decision makers are, in fact, groups rather than individuals, such as boards of directors, legislatures, committees or families. Households and firms, the main decision making agents in economic theory, are typically not individuals, but groups of people with a joint stake in economic decisions. Similarly, political or military decisions as well as decisions an monetary policy, for instance, are taken by groups rather than individuals. Traditional economic theory does not address the influence of the type of decision makerindividual or group- an actual decisions properly. Of course, public choice and social choice theory deal with group decision-making, but typically from the perspective of how individual preferences can be aggregated to a group decision, which rules of decision making groups apply or how ihese rules shape the outcome of a decision making process. Public choice theory, however, does not address the question of whether the resulting group decisions differ systematically from those of individuals, and it does not account for the fact that individuals behave differently when deciding alone from when acting as a group member. This research project shall examine the influence of the type of decision maker for economic decisions by the use of economic experiments. Our central research questions are the following: 1. How do members of groups come up with a group decision? 2. How do group decisions differ from the decisions made by individuals? By addressing these questions, we aim to provide empirical (experimental) evidence for the influence of the type of decision maker an decisions. In particular, we study bargaining behavior of groups, respectively individuals, by running experiments an the dictator game, the ultimatum game and the trust game. We choose a `within-subjecis` design to control for individual preferences in group decision making. Social decision scheure theory (Davis, 1973) is applied to test the influence of different social decision schemes an group decisions.

This project has studied the economics of the decision maker, i.e. whether individuals and teams make different decisions when deciding in the same situations. Using the method of experimental economics the main findings of the project are as follows: 1) Team decisions are generally closer to standard game theoretic predictions than individual decisions. 2) Teams seem to be stronger motivated by payoff maximization and their decisions are more selfish than the decisions of individuals. 3) Teams can eliminate errors in individual decision making and are quicker in adapting to new environments in strategic games. These general findings apply to a wide range of strategic interaction, ranging from simple lottery choices and investment decisions to bidding in auctions and bargaining for a deal. The most important achievement of the project is to have shown that the above mentioned differences between individual and team decision making are fairly robust across several games and also across different modes of decision making in teams (either face-to-face or electronically via chat or voting mechanisms). So what makes team decisions different from individual ones then? One of the key contributions of the project shows that two effects are mainly responsible: 1) The opportunity to exchange views and advice in teams, and 2) the responsibility for others when making joint decisions.