On the consensus effect

Abstract

Individuals often tend to conform to the choices of others in group decisions, compared to choices made in isolation. We show that this behavior — which we term the consensus effect — is equivalent to a well-known violation of expected utility, namely strict quasi-convexity of preferences, which is shared by many popular non-expected utility models. In contrast to the equilibrium outcome when individuals are expected utility maximizers, quasi-convexity of preferences imply that group decisions may fail to properly aggregate preferences and strictly Pareto-dominated equilibria may arise.