Information acquisition and decision making in committees: A survey

Abstract

E C B • W o r k i n g P a p e r N o 2 5 6 • S e p t e m b e r 2 0 0 3Abstract This is a survey on the recent game theoretic literature on committee decision making. We consider theoretical work on the role of (i) strategic voting, (ii) costly information acquisition, (iii) con°icting interests, and (iv) communication in committees. Moreover, we review recent experimental evidence on these issues. Our analysis focuses on the optimal size, composition, and decision rules of committees.We discuss implications for the design of monetary policy committees.Keywords: committees, strategic voting, costly information acquisition, monetary policy committees.JEL N.: D71, E52. E C B • W o r k i n g P a p e r N o 2 5 6 • S e p t e m b e r 2 0 0 3 Non technical summaryThis is a survey on the recent game theoretic literature on committee decision making. This literature has studied rational voter behavior when (i) committee members do not always reveal their signal about the true state of the world, (ii) committee members obtain their signal at positive costs, (iii) committee members may have di®erent objectives and (iv) committee members may exchange views before voting.These insights are used to give advice on optimal committee design.The main¯ndings of this literature can be summarized as follows:1. When information acquisition is costly, the optimal committee size is¯nite. Larger committees yield little incentives for individual information acquisitionand may lead to less informed decisions. The optimal number of committee members is nonincreasing in information acquisition costs and ceteris paribus larger if (i) the costs of type I and type II errors are more similar, (ii) the prior is more di®use and (iii) the signal is less accurate.2. Even with con°icting interests delegation to one single member may be Pareto dominated by committee decision-making. When the committee rule is chosen appropriately, gains from sharing information outweigh distortions from information manipulation regardless of the extent of con°icts in the committee. The reason is that committee procedures are themselves chosen to control strategic misrepresentation given self-interested behavior.3. The optimal committee size is always smaller than the¯rst best level when there are con°icting interests. The reason is that noisy reports by committee members with policy biases are not as informative as if there were no incentives to distort information. E C B • W o r k i n g P a p e r N o 2 6 • S e p t e m b e r 2 0 0 3erences. Increasing con°icts of interest lead to stronger incentives for strategic manipulation of private information.5. Total social surplus may instead increase in preference heterogeneity when moral hazard problems in information gathering severely limit the feasible committee size.6. The decision rule has to be adapted to the speci¯c problem at hand. The majority rule has to be adjusted to the distribution of signals and the initial prior 8. Granting a committee independence may enhance the quality of its research.Incentives for informa...

How should large and small countries be represented in a currency union?

“…This contrasts with a somewhat more recent body of papers discussing the e¢ ciency of alternative decision-making structures (see Gerling et al (2003) for a survey). Gerlach-Kristen (2002), for instance, argues that committees with multiple members might be better suited than single individuals to process information, fostering e¢ cient decision-making-a theoretical result supported by experimental evidence produced by Blinder and Morgan (2002).…”

Central bank boards around the world: Why does membership size differ?

“…11 Gerling, Grüner, Kiel, and Schulte (2005) and Fujiki (2005) provide comprehensive surveys of the literature; Sibert (2006) and Vandenbussche (2006) review the related-and highly useful-social psychology literature that looks at the effects of group size on information processing and moderation. 12 On the cost side, a plausible conjecture is that larger MPCs will generally imply greater effort from all involved for a given decision problem which may translate into less effective monetary policy making.…”

Abstention, ideology and information acquisition

“…While variation in the ideological dimension is enough to show that rel- [20] also recognizes this effect. 17 Although focusing on the impact of media bias, [9], find that the availability of independent TV channels decreases turnout in Russia. They do control for initial ideology in calculating the effect of vote choice.…”

“…17 Let Pr ( 6 = ∅ |  ) be the probability of voting conditional on the quality of the information  and on the state . It is obvious that  Pr(6 =∅|)  = 0 for all those who strictly prefer to be uninformed ( strong supporters,  strong supporters and abstainers) as well as for those who behave as independents.…”

“…1 [17] surveys models with information acquisition in committees. 2 Abstention has also been studied as a decision theoretic problem as in [19] and [21].…”