Monday, April 16, 2012

KECK Steffen, DIECIDUE Enrico, BUDESCU David
Group Decisions under Ambiguity: Convergence to Neutrality
INSEAD Working Paper 2012/43/DS revised version of 2010/79/DS

This paper focuses on decisions under ambiguity. Participants in a laboratory experiment made decisions in three different settings: (a) individually, (b) individually after discussing the decisions with others, and (c) in groups of three. We show that groups are more likely to make ambiguity-neutral decisions than individuals, and that individuals make more ambiguity-neutral decisions after discussing the decisions with others. This shift towards higher ambiguity neutrality in groups and after a group discussion is associated with a reduction in the rates of both ambiguity aversion and ambiguity seeking. We attribute the results to the effective and persuasive communication that takes place in groups.