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Article Excerpt
1. Introduction
The idea that group decisions are more informed than individual decisions has considerable intuitive appeal. Groups bring together individuals with unique perspectives, information, and expertise that, if pooled efficiently, should be able to achieve superior outcomes compared to individual decisions or the average of a set of individual decisions. Nevertheless there is a relatively long line of research that challenges this intuition, showing that in the presence of a "hidden profile (HP)," groups consistently fail to pool the available information, achieving distinctly suboptimal decisions (Stasser and Titus 2003). Given that many decisions within organizations are made by groups, these results are, to say the least, disappointing.
Consider a group of individuals faced with a small set of choices with the task of reaching a decision on the alternative with the best set of characteristics. There are a finite set of characteristics common to all the choices, with at least one member of the group having information about every characteristic for each alternative. Information about these characteristics consists of either (i) common information available to all members of the group or (ii) private information that is known by a single member of the group. When an HP is present, the common information supports a suboptimal alternative. But if the entire group pooled its available information and evaluated it in an unbiased way, they would prefer a different, superior alternative.
What the history of HP experiments shows is that groups typically fail to fully share their information, consistently failing to choose the optimal alternative. A number of reasons for this have been reported in the literature. One of the leading causes is that groups disproportionately discuss common information as opposed to the group members' private information (Stasser and Stewart 1992). Other factors include information overload (too much information for individuals to remember), and biased recall that favors the alternative that each individual's prediscussion information indicates is the best alternative (Stasser and Titus 2003). Although the failure of team, members to fully share information is not always detrimental to group performance, it often will be when an HP is present.
The failure of groups to overcome the HP problem is quite disturbing from the point of view of organizational behavior because it suggests that groups, although having access to all the relevant information to identify an optimal choice, fail to do so (Rulke and Galaskiewicz 2000). Results from HP experiments have been extensively cited in management science and organization behavior literature. Among other things, the results have been used to call into question the superiority of diversity in organizations (Klein and Harrison 2007), as well as suggesting the optimal level of diversity in organizations (Harrison and Klein 2007). The results have been used to call into question the nature of group interactions, with a number of researchers pointing out the negative implications of failures to solve the HP problem (e.g., Dennis 1996, Thomas-Hunt et al. 2003), along with suggestions as to how to help overcome the problem (Weber and Donahue 2001, Brodbeck et al. 2007).
Failures of group members to effectively pool information to discover an HP occur in the context of a common purpose problem, where the incentives of members of the group are aligned both in terms of their preferences over the characteristics of each choice option, and the weights attached to these characteristics. However, the literature indicates a disturbingly large deviation from this ideal; for example, when pre-discussion information was distributed in such a way as to establish consensus in favor of an inferior candidate, as many as 33% of the subjects preferred another candidate (Stasser and Titus 1985). In response, Experiment 1 replicates a classic HP experiment. But rather than employ descriptions of characteristics that subjects typically view as good, bad, or indifferent, we assigned ratings to each of the characteristics and provided explicit monetary incentives for choosing the optimal alternative. This is a standard strategy in experimental economics and, indeed, served to create substantially more homogenous preferences than reported in the original experiment. Nevertheless, this failed to make a dent in the groups' ability to uncover the HP, as groups still identified the optimal candidate less than would be predicted by simply guessing. Analysis of this data showed that even if subjects were willing and able to share all the information that they remembered, without bias, they could not remember enough information to consistently uncover the HP.
In response to this, Experiment 2 employed the same procedures as Experiment 1 but reduced the set of characteristics to a manageable level so that given the average rate of recall, groups should have been able to uncover a little over 75% of the HPs, assuming subjects were willing and able to share all the information they could remember without bias. Here, too, groups fell well short of what was predicted; they uncovered only 35% of the HPs. We explore three factors that might be responsible for this shortfall: heterogeneity in the amount of information recalled by subjects and therefore by groups, biases in what information is recalled, and errors in information recalled (e.g., a given alternative's characteristic is mistakenly recalled as positive when in fact it was negative or neutral). We find that the first two factors, by themselves, play a minor role in the failure to uncover HPs. But mistakes in recalling information, in conjunction with the underlying structure of the problem, account for most of the failures compared to what was predicted. The reason for this is that in an HP problem, mistakes in recalling common information can--and typically are--corrected, with this information favoring the suboptimal candidate. However, mistakes with respect to private information cannot, by definition, be corrected, and correct private information is necessary to uncover the HP. We label the impact of these mistakes the "group correction factor," as correction of mistakes about common information naturally biases choices in favor of the suboptimal choice when an HP is present.
Mistakes in recalling information have not been discussed before as a factor contributing to groups' failure to discover HPs. In addition, the fact that most of the mistakes, with respect to common information, are corrected in the course of group discussions helps to explain the otherwise puzzling finding that groups spend a disproportionate amount of time discussing common, as opposed to private, information. However, this is exactly what one would expect in the presence of errors and the natural tendency of group discussions to focus on cleaning up those inconsistencies.
Experiments on the HP problem are part of a broader, experimental literature on information aggregation, or the lack thereof, in groups. Work on asset markets (reviewed in Sunder 1995) shows that markets are capable of disseminating and aggregating private information, but this will not be achieved instantaneously or without replication, and will fail in some environments. Work on information cascades shows that a sizable minority of decision sequences result in "reverse cascades," where agents either start a chain of incorrect decisions due to initially misrepresentative signals, or fail to initiate correct cascades even when no misrepresentative signals are present (Anderson and Holt 1997; also see Goeree et al. 2007 for how "errors" in Bayesian updating with long sequences should eventually result in the correct state). Blinder and Morgan (2005) show that groups make somewhat better decisions, on average, than individuals, but that the demand for additional information does not depend on whether the decision is made by an individual or a group. In decisions regarding risky choices, groups tend to decide differently than individual members would on their own, sometimes resulting in making riskier choices, and at other times resulting in greater restraint in risk taking (Davis et al. 1992). Thus, the collapse of information aggregation documented in the HP problem is not unique. (1) What our experiment does is to identify a previously undiscovered factor that may be responsible for the dismal performance of groups in discovering HPs, a factor that has nothing to do with deficiencies in how groups process information or make decisions, but is rather a structural element underlying the presence of an HP.
2. Experiment 1
Experiment 1 is designed to evaluate the effect of explicit incentives on the ability to overcome the HP problem. We replicate the original HP experiment (Stasser and Titus 1985), including some of the profiles they employed, where each of three candidates for political office had 16 relevant characteristics, with each subject provided with information about 10 of the characteristics. Two treatment conditions were employed: one in which groups were permitted, to take their information about candidate characteristics into the caucuses (the "perfect recall" condition), the other in which they were not, as in the typical HP experiment (the "imperfect recall" condition). The first treatment is a calibration exercise to determine if explicit incentives, in conjunction with perfect recall, will achieve near 100% group agreement in favor of the optimal candidate. Given that the perfect recall treatment achieves this, the second treatment is designed to determine the impact of our experimental procedures on the ability to discover HPs.
2.1. Method
Two experimental sessions were conducted, each of which employed 12 undergraduate students attending The Ohio State University, who responded to e-mails to participate in a voting experiment in which they would earn money as a result of their choices. For each session, recruitment e-mails were sent to approximately...
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