Abstract
We study the nonparametric identification and estimation of a structural model for committee decisions. Members of a committee share a common information set, but differ in ideological bias while processing multiple information sources and in individual tastes while weighing multiple objectives. We consider two cases of the model where committee members have or don't have strategic incentives for making recommendations that conform with the committee decision. For both cases, pure-strategy Bayesian Nash equilibria exist, and we show how to use variations in the common information set to recover the distribution of members' private types from individual recommendation patterns. Building on the identification result, we estimate a structural model of interest rate decisions by the Monetary Policy Committee (MPC) at the Bank of England. We find some evidence that recommendations from external committee members are less distorted by strategic incentives than internal members. There is also evidence that MPC members differ more in their tastes for multiple objectives than in ideological bias.
Highlights
Public policy or business decisions are often made by committees organized to serve a common cause
We model committee members’ private types and their effects on individual recommendations in the presence of a common information set; whereas the existing literature mostly focus on the aggregation of private information among members, e.g., Iaryczower and Shum (2012b)
We study the identification and estimation of a structural model of committee decisions when the members have two-dimensional private types: how they process different sources of information; and how they weigh multiple dimensions in the target outcome
Summary
Public policy or business decisions are often made by committees organized to serve a common cause. In both cases, pure-strategy Bayesian-Nash equilibria (PBNE) exist, and the identification of ideological bias and private tastes are obtained by exploiting how the patterns of individual recommendations, or the conditional choice probabilities, change with the common information set in data. Committee members with heterogeneous tastes and ideological bias react differently to the same changes in the common information This allows us to recover the distribution of two-dimensional private types from their recommendation patterns. We model committee members’ private types and their effects on individual recommendations in the presence of a common information set; whereas the existing literature mostly focus on the aggregation of private information among members, e.g., Iaryczower and Shum (2012b).
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