Are groups more rational than individuals? A review of interactive decision making in groups

Many decisions are interactive; the outcome of one party depends not only on its decisions or on acts of nature but also on the decisions of others. In the present article, we review the literature on decision making made by groups of the past 25 years. Researchers have compared the strategic behavior of groups and individuals in many games: prisoner's dilemma, dictator, ultimatum, trust, centipede and principal-agent games, among others. Our review suggests that results are quite consistent in revealing that groups behave closer to the game-theoretical assumption of rationality and selfishness than individuals. We conclude by discussing future research avenues in this area

Reserve Price Auctions with a Strong Bidder

This paper investigates private-value `reserve price' auctions when there is a strong bidder in an n-bidder model. Consider an auction model, in which bidders draw their values from the same distribution, but then identity of the high-value bidder is revealed. This can be more plausible than the pure symmetry and asymmetry assumptions in certain real-life applications. In many auctions, auctioneers usually set a reserve price. Landsberger, et al. (1999) develop a model with a strong and a weak bidder. We enhance this model by introducing more bidders and reserve prices in both the first-price and the second-price auction. In their paper, Landsberger, et al. only consider the first-price auction without the seller's reserve price (reserve price) for two bidders. Elbittar and Unver (2001) examine this environment with reserve price when there are only 2 bidders.\t The contribution of this paper is generalization of the Elbittar and Unver (2001) work to n-bidders. For the first-price auction, the analytically intractable equilibrium is approximated using computational techniques. Simulation results provide evidence that the first-price auction can still generate as much expected revenue as the second-price auction and even more with an optimal reserve price. The findings can successfully explain the reason of differences in revenues generated at several privatization auctions using the two formats with similar preference structures.First-Price Auctions, Numerical Methods, Reserve Price