Conflicts and Common Interests in Committees

   (376 K)

Committees improve decisions by pooling independent information of members, but promote manipulation, obfuscation, and exaggeration of private evidence when members have conflicting preferences. We study how self-interest mediates these conflicting forces. When members' preferences differ, no person ever submits a report that allows perfect inference of his private information. Instead, equilibrium strategies are many-to-one mappings that transform continuous data into ordered ranks: voting procedures are the equilibrium methods of achieving a consensus in committees. Voting necessarily coarsens the transmission of information among members, but is necessary to control conflicts of interest. The degree of coarseness of the equilibrium voting procedure is determined by the extent of conflicting preferences. Though self-interests necessarily reduce the efficient use of information in committees, real information sharing occurs nonetheless. Committees make better decisions on behalf of the average' (Pareto weighted) member than would any individual on the basis of own information. Committees are viable, though imperfect ways of making decisions when information is dispersed among members.

Published: Li, Hao, Sherwin Rosen and Wing Suen. "Conflicts And Common Interests In Committees," American Economic Review, 2001, v91(5,Dec), 1478-1497.

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