From individual decisions to team decisions under risk: evidence from a field experiment

This paper investigates how individual decisions are aggregated to team decisions under risk in field experiment with a sample of Ethiopian farmers and the team decision-making process behind this aggregation. In an experiment structurally similar to the Gneezy-Potters' risk game, subjects make decisions first individually and then jointly with a random anonymous partner. In the aggregate, teams make higher allocation into the risky asset compared to the average of individual decisions. However, teams are neither polarizing nor simply averaging individual preferences. Instead, team decisions are consistent with an outcome of group bargaining and deliberation process based on intensity of individual preferences. But more risk-taking subjects have a stronger influence on team decisions. This influence of more risk-taking members on the group decision is leveraged by their better education levels. Analysis of the team decision-making process reveals several interesting insights. About 54% of the teams do not reach immediate agreement with initial allocations. Both less risk-taking and more risk-taking team members are equally likely to disagree with initial allocations but for different reasons. Teams that disagreed with initial allocations reached final team decisions significantly different from disagreed initial allocations. Less risk-taking subjects are more willing to concede to allocations proposed by more risk-taking subjects to reach at an agreed team decision. Demanding messages in group communications have a stronger effect on outcomes of group decision-making. Finally, teams with greater differences in willingness to take risk among members are more likely to disagree with initial team allocations, take more rounds of deliberations to come to a decision, and make choices further away from the average of individual decisions. Our results permit to better characterize the process of group decision-making beyond differences between individual and group decisions.