Are Two Heads Better Than One? Monetary Policy by Committee

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Abstract
Two experiments were conducted to test the common hypothesis that groups make decisions more slowly than individuals. One of these experiments imitates real-life monetary policy decisions. In both cases, the hypothesis is found wanting: groups are not slower than individuals. In both experiments, we also find that group decisions are on average better than individual decisions. This holds regardless of whether the groups make decisions by unanimity or majority rule. Simple mechanical theories of group decisionmaking— that the group follows its average player, median player, or best player—do not explain the results. Group interactions seem to matter.