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Barking up the right tree: Are small groups rational agents?

Published online by Cambridge University Press:  14 March 2025

James C. Cox and
Stephen C. Hayne
James C. Cox*
Affiliation:
Department of Economics and Experimental Economics Center, Georgia State University, Atlanta, GA 30302-3992
Stephen C. Hayne*
Affiliation:
Department of Computer Information Systems, Colorado State University, Fort Collins, CO 80523
*
e-mail: jccox@gsu.edu
e-mail: stephen.hayne@colostate.edu
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Abstract

Both mainstream economics and its critics have focused on models of individual rational agents even though most important decisions are made by small groups. Little systematic work has been done to study the behavior of small groups as decision-making agents in markets and other strategic games. This may limit the relevance of both economics and its critics to the objective of developing an understanding of how most important decisions are made. In order to gain some insight into this issue, this paper compares group and individual economic behavior. The objective of the research is to learn whether there are systematic differences between decisions made by groups and individual agents in market environments characterized by risky outcomes. A quantitative measure of deviation from minimally-rational decisions is used to compare group and individual behavior in common value auctions.

Keywords

RationalityGroupsAuctionsExperiments

JEL classification

D44: AuctionsC91: Laboratory, Individual BehaviorC92: Laboratory, Group Behavior

Information

Type
Research Article
Information
Experimental Economics , Volume 9 , Issue 3: Special Issue: Behavioral Economics , September 2006, pp. 209 - 222
Copyright
Copyright © 2006 Economic Science Association

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