American Economic Review: Vol. 96 No. 4 (September 2006)
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Choice Shifts in Groups: A Decision-Theoretic Basis
Eliaz, Kfir, Debraj Ray, and Ronny Razin. 2006. "Choice Shifts in Groups: A Decision-Theoretic Basis." American Economic Review, 96(4): 1321-1332.
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)
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