Template-Type:ReDIF-Paper 1.0  
Title:Teams Take the Better Risks
Author-Name: Bettina Kuon
Author-Name: Abdolkarim Sadrieh
Author-Name: Barbara Mathauschek
Classification-JEL:  C91, C92, D81, D70, M10
Keywords: Decision under Risk, Group Decision, Expected Utility, 
   Portfolio Selection
Abstract: Many important economic and political decisions are made by 
   teams. In the economic literature, however, the decision units are 
   frequently modeled as individual economic agents. The paper experimentally 
   investigates the question to what extent observed team decisions 
   under risk are actually consistent with the principles of rational 
   choice, specifically the principles of <i>Expected Utility Theory</i> 
   (EUT) and of <i>Portfolio Selection Theory</i> (PST). The experiment 
   is performed with individuals and teams. We find almost no evidence 
   for the greater compliance of team decisions than of individual 
   decisions with the principles of EUT. However, there is substantial 
   evidence for the consistency of team decisions with the PST. Compared 
   to individuals, teams accumulate significantly more expected value at 
   a significantly lower total risk (measured in SD). We introduce a team 
   decision algorithm, <i>excess-risk vetoing</i>, that combines simple 
   majority voting with the right to veto alternatives providing additional 
   risk that is not compensated by additional expected value. We find that 
   the results of our experiment are well explained by the excess-risk 
   vetoing.
Length: pages
Creation-Date: 1999-03
Handle: RePEc:bon:bonsfb:452