Are Two Heads Better Than One?: An Experimental Analysis of Group vs. Individual Decisionmaking

We report the results of two sets of experiments comparing decisions made as individuals to those made in groups under majority and unanimity rule. The first setup posed a purely statistical problem devoid of any economic content: Subjects were asked to guess the composition of an (electronic) urn filled with blue balls and red balls. The second mimicked the problem faced by central bankers: Subjects were asked to steer an (electronic model of an) economy by manipulating the interest rate. The results were both striking and strikingly consistent. Neither experiment supported the commonly-held belief that groups make decisions more slowly than individuals. Both experiments found that groups, on average, made better decisions than individuals. Surprisingly, groups outperformed individuals by almost exactly the same margin in each experiment. Finally, there were practically no differences between group decisions made by majority rule and group decisions made under a unanimity requirement.