Are groups ‘less behavioral’? The case of anchoring

Meub, Lukas; Proeger, Till

doi:10.1007/s11238-017-9608-x

Cited by 14 publications

(12 citation statements)

References 60 publications

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“…For example, Müller and Tan (2013) report that in one-shot markets they find no significant differences in the behavior of groups and individuals, and in repeated markets they find that the behavior of groups is further away from the subgame-perfect equilibrium of the stage game than that of individuals. For Meub and Proeger (2018) groups and individuals are equally biased by external factors, etc. Some authors however indicate that groups make less risky decisions (He & Villeval, 2017).…”

Section: Discussionmentioning

confidence: 99%

Does size matter in group decision making? Simulation experiments with LNG professionals bidding in auction markets

Otamendi

Pérez

2022

JIEM

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Purpose: An important issue in decision-making processes is whether groups decide better than individuals. This paper compares the bidding behavior of groups of professionals while playing a business game that simulates, in a controlled environment, the sequential unit capacity auctions in the Spanish LNG market.Design/methodology/approach: First, we randomly grouped professionals in groups of different size—SOLOs, DUOs, and TRIOs—and played the game in-situ under both First and Second price unit capacity auctions, with SOLOs outperforming groups. Second, we ran non-parametric simulations mixing professionals in groups of different size, in which bids were coupled with those registered during the in-situ sessions. Third, we ran non-parametric simulations in which the players were either ‘rational machines’ that bid according to Nash equilibrium or groups of ‘professionals’ of different size.Findings: The size of the decision group does matter. After the in-situ and the bootstrapped simulated games, the main result is that size does matter, and groups are not necessarily superior to individuals bidding alone. SOLO players bid closer to MACHINEs and lower than DUOs or TRIOs, while obtaining about the same number of units and higher payoffs than groups. Additionally, the ‘degree of rationality’ of the participants does also matter.Research limitations/implications: Even after applying the hybrid simulation methodology to increase sample size and allow for additional experimental settings, some of the scenarios are fictitious. Modification of the business game to allow for an even more realistic game could be implemented.Practical implications: After the hybrid simulation approach, the main implication of the paper is that to increase efficiency in resource allocation professionals should bid individually while using the theoretical knowledge of rational machines.Originality/value: To our knowledge, this is the first time that this double-experiment simulation methodology is used to analyze bidding behavior in auctions.

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Section: Discussionmentioning

confidence: 99%

Does size matter in group decision making? Simulation experiments with LNG professionals bidding in auction markets

Otamendi

Pérez

2022

JIEM

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“…Sharing thoughts and opinions within group settings can potentially mitigate the anchoring effect. A substantial portion of business and managerial decisions occur within group contexts, and it is important to acknowledge that external anchors can exert their influence on judgments even in such collective environments (de Wilde et al, 2018;Meub & Proeger, 2018). Nonetheless, the manner in which individuals collectively arrive at a consensus can attenuate the impact of the anchoring effect.…”

Section: Group Judgmentsmentioning

confidence: 99%

“…Nonetheless, the manner in which individuals collectively arrive at a consensus can attenuate the impact of the anchoring effect. For instance, Meub and Proeger (2018) formed triads of participants and asked them to make an unanimous decision on several factual questions. Despite the presence of the anchoring effect in the group decisions, its magnitude was comparatively weaker than in individual decision settings.…”

Section: Group Judgmentsmentioning

confidence: 99%

Anchoring effect in business

Bahník,

Yoon

2023

Preprint

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In many business and managerial decisions, accurate estimation of numeric attributes is crucial, but such estimates are often biased by a previously considered value—a cognitive bias known as the anchoring effect. This paper provides an overview of the current state of the literature on the anchoring effect, with a particular focus on its applications in business settings. First, we summarize different processes that may underlie the anchoring effect, which include conversational inferences, insufficient adjustment from the anchor value, selective accessibility of information compatible with an anchor, and distortion of a response scale. Second, we review the applications of anchoring across various business practices, such as predictions, valuations, negotiations, auctions, promotions, and job performance evaluations. We provide examples of potential sources of anchors in these domains and discuss limitations of the existing studies. Next, we describe the challenge of debiasing anchoring and introduce potential strategies for reducing the influence of the anchoring effect. Finally, we discuss topics that have been underexplored and suggest avenues for future research on the anchoring effect.

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“…In this discussion about the quality on decisionmaking (individual or group), finance literature emphasizes that research on group decisions have evolved significantly over the last years and that the more relevant decisions on the companies economic and financial policy are made by groups, because they are prone to make more rational decisions if compared with individual decisions (Charness & Sutter, 2012;Kugler, Kausel, & Kocher, 2012;Meub & Proeger, 2018).…”

Section: The Role Of the Decision-maker In Investments Decisionsmentioning

confidence: 99%

“…Although financial literature emphasized that decisions made in group have as their objective to diminish cognitive and emotional limitations of individual decisions and tries to align to the three principles described by Fama (1970) about efficient market, it neglects the heuristics in group decisions in the context of experimental economic research (Meub & Proeger, 2018).…”

Section: The Role Of the Decision-maker In Investments Decisionsmentioning

confidence: 99%

Behavioral Biases and the Decision-Making in Entrepreneurs and Managers

2022

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Objective: the present research aims to understand the role of behavioral biases present in the investment decision in entrepreneurs and managers, in the light of the behavioral finance. Theoretical approach: Considering that non-financial aspects influence the decision making of investments in real assets, the present research focuses on how individual characteristics, notably behavioral biases, can affect these investment decisions, from the perspective of Behavioral Finance. Method: a qualitative research was developed. Interviews were held with eight managers or entrepreneurs who usually make investment decisions in real assets within their organizations. Interviews were transcribed and content analysis was used to analyze the data. Results: findings suggest the presence of behavioral biases in the decision-making presented by the interviewees, specifically the optimism and overconfidence, loss aversion, self-attribution, sunk cost, endowment effect, regret, conservatism, and external agent effect. Optimism, overconfidence, and loss aversion were present in all the interviewees’ speeches. Regret and external agent effect emerged in entrepreneurs’ speech while conservatism bias emerged in the speech of managers. Conclusions: entrepreneurs and managers indistinctly presented behavioral biases; however, the triggers for those biases are diverse. When it refers to insecurity in deciding, entrepreneurs allow themselves to question their own decision-making ability, by either regret or consulting an external agent, while managers hold themselves in conservative decisions.

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Are groups ‘less behavioral’? The case of anchoring

Cited by 14 publications

References 60 publications

Does size matter in group decision making? Simulation experiments with LNG professionals bidding in auction markets

Does size matter in group decision making? Simulation experiments with LNG professionals bidding in auction markets

Anchoring effect in business

Behavioral Biases and the Decision-Making in Entrepreneurs and Managers

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