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Committee Processes as Information Aggregation Mechanisms: Process Design and Experimental Results

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Committee Processes as Information Aggregation Mechanisms: Process Design and Experimental Results Morgan H. Llewellyn Charles R. Plott California Institute of Technology. Presented at the Lee Center Workshop May 2006. MARKETS AND PRICES ARE KNOWN TO BE INFORMATION VEHICLES

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Committee Processes as Information Aggregation Mechanisms: Process Design and Experimental Results

Morgan H. Llewellyn

Charles R. Plott

California Institute of Technology

Presented at the Lee Center Workshop May 2006

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MARKETS AND PRICES ARE KNOWN TO BE INFORMATION VEHICLES

Information held by insiders CAN get transmitted to outsiders.

CAN COMMITTEE PROCESSES, PROPOSALS AND VOTING BE INFORMATION VEHICLES?

Those who care have the right to vote but the information is held by special interests with no right to vote.

WHAT TYPE OF PROCESS CAN GET THE INFORMATION FROM THE INSIDERS TO THE OUTSIDERS?

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SOMETHING HAPPENING?

EVENTS

As the event unfolds signals and indicators are dispersed to different people. No isolated, individual signal is strong.

Information in the signals differs from the information in humans. Filtered by human observation, it exists subjectively as vague ideas, intuition and hunches.

PREDICTION ABOUT EVENTS

Information Aggregation Mechanisms

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..

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C

CCCCC

A B C D E F

event drawn it is C

individual signals drawn conditional on event C

signals dispersed to separate individuals

C

C

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$125

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Committees and elections

Options and incentives

Alternatives: Points on the Chalkboard

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Committees and elections

Options and incentives

conflict and incentives

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Rules and Institutions

Equilibrium and cooperative game models (e.g the core) tend to be the best models of the outcome

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INFORMATION VARIABLE:
  • DECISIONS ARE MADE BY THOSE WHO CARE (COMMITTEE MEMBERS WHO VOTE) BUT DO NOT KNOW THE STATE
  • THE STATE IS KNOWN BY THOSE WHO CARE BUT CANNOT VOTE
  • INFORMED AGENTS HAVE A DYADIC, EQUILIBIRUM CONFORMING RELATIONSHIP.
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Linear Influence Hypothesis

Dyadic

Equilibrium Conforming

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RESULTS
  • The institutional design was successful: Information Aggregation takes place
  • The general informational environment is important
  • We have some understanding of why
  • The linear Influence Hypothesis works well
  • The behaviors of the insiders have expected features
  • The initial recommendations of insiders is not the only source of information
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The institutional design was successful: Information Aggregation takes place

The general informational environment is important

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Polar Cases: Full Information About the State

Polar Cases: No Information About State

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COMMITTEE NEVER LEARNS THE TRUTH

COMMITTEE LEARNS TRUTH AFTER EVERY DECISION

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COMPETITION AND STRATEGIES OF INSIDERS: Shaped by the institutions
  • The insider proposals contain information and it is used. The linear inference model receives support.
  • Equilibrium conforming conflicts reduce the advantage of collusion among insiders.
  • Strategic exaggerations and misrepresentations by insiders can be observed.
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SOURCES OF INFORMATION

LINEAR INFLUENCE MODEL

Insider recommendations are potential sources of information

Feedback

.51,.51

No Feedback

.51, .48

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Initial proposals A and B

The distance between insider recommendations is increasing in periods for feedback, but the distance is not statistically significant for the periods with no feedback

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The mechanism contains sources of information in addition to the initial proposals by the insiders
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Lack of trust in initial recommendations causes people to look for other sources of information such as amendments to proposals.
accuracy improves with truthfulness of insiders and with experience
Accuracy improves with truthfulness of insiders and with experience

Decision distancei = distance between a&b recs + period + constant

  • Conclusions: distance from equilibrium increases with the distance between A & B’s recommendations grow, but the amendment process possesses conveys information which decreases error

feedback environment

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SPEICAL COMMITTEE ORGANIZATION FACILITATES INFORMATION AGGREGATION: INFORMATION SEEPS IN EVEN WHEN HELD ONLY BY SELF INTERESTED PARTIES.

DYADIC, EQUILIBRIUM CONFORMING CONFLECTS ARE CENTRAL: CLASSICAL MODELS OF COMMITTEE DECISIONS APPLY

THE SUCCESS OF THE MECHANISM DEPENDS UPON THE BACKGROUND INFORMATION ENVIRONMENT

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