MGMD02H3 Final: Session 8: Social Decision Making & Bounded Self-Interest

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Department
Management (MGM)
Course
MGMD02H3
Professor
Sam J Maglio
Semester
Winter

Description
Lecture 8: Social Decision-making Social Decision Making Group Decision Making - “none of us is as smart as all of us” - Baseball prediction —> most accurate when it was rated by a lot of people Why Aggregation Works - Estimates about unknown quantities are often unreliable, and susceptible to errors. - Averaging can help cancel out those errors, provided that: • Errors are random (i.e., not systematic) it won’t be random if you ask group of people who love blue jays • There is diversity and independence of opinion - The more people you have, it cancels out all the noises or inaccuracy you have Problems with Group Decision Making - Group of ppl were asked to generate as many ideas as possible to solve a problem: • Half of the groups worked together to generate ideas. Half of the “groups” worked separately. Opinions are often not independent • Much of the wisdom of aggregates comes from combining diverse perspectives, but group dynamics often inhibit the voicing and combination of diverse perspectives • Ex. Hidden Profiles - deciding which candidates was best suited for the president - % Supporting Candidate A Some groups, all members had all the information about all of the candidates vs. 100% Before Discussion 80% 83% After Discussion each member received only a subset of the 67% 60% information that supported Candidate A 40% 23% 20% 18% The right answer —> in favour of candidate A 0% All Information Partial InformationPartial Info: should look like the left one, if people were able to share information all equally (collectively lead to the right answer) Hold on to the information (hide the knowledge) Groups are often self-affirming - Group Polarization Groups inclined to favour a particular conclusion tend to polarize after group • discussion - Ex. if you put conservatives in a table have them have a discussion —> they will be more conservative after discussion Some opinions are not voiced • Ex. 38 who saw murder didn’t call the police • Explanation #1: Social Loafing - Someone else would do the job, I don’t have to do that - One on one tug of war —> put maximum effort - The group gets bigger, the less individual effort is put into —> Bi-standard effect - Experimenter: Why didn’t you help? Modal response: the other students didn’t look worried, so I assumed it wasn’t a big deal • Explanation #2: Pluralistic Ignorance - A bias about a social group held by members of that social group - Majority of group members privately reject a norm, but incorrectly assume that most others accept it, and therefore go along with it. • Especially likely when private attitude deviate from public behaviour - Classic example: Drug and alcohol use on campus - “when the plurality is ignorant of the plurality” - The norm is: do nothing —> I wanna help but I assume that everyone else don’t want help —> I don’t want to help either • For information, normative and motivational reasons, people are often reticent to vote dissenting opinions. - Which line is the same length? • Louder, “important” voices often prevail e.g., the corporate boardroom The Problem with Expertise: Experts Politicians were asked to predict the political future: - Experts were no more right about the future than the rest of us, and some did worse - “Human beings who spend their lives studying the state of the world… are poorer forecasters than dart-throwing monkeys” - Ex. predicting the stock market —> the experts had no better understanding than the non-experts Overconfidence Revisited • The vast majority of new businesses fail. More than 70% of new manufacturing plants in North American close within their first decade of operation. • Investors turn over their portfolios at a rate of more than 60% on the “knowledge” they think the have about the market • In studies of competition, the typical participants believes his or her likelihood of winning is greater than 50% - Naive realism • I see and interpret the world accurately • Other rational people will too. • If they don’t, they - Saw something different - are stupid - are biased • People seem to fail to (sufficiently) appreciate how things look from another person’s vantage point • People see the world through their own perspective (e.g., which team started the rough play?” The Other Problem with Expertise: In some groups, people were told that all of the other group members were experts. —> The “expert” groups generated 35% fewer ideas. Prescriptions? - Elicit all opinions in
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