Preference Issues in Group Decision Making

1. Preference Issues in Group Decision Making David L. Olson Texas A&M University INFORMS San Antonio

2. Ideal • Objective measures Max Weber: Rational organization labor grouped in factories; populations massed in cities; technical control; advertising; planned sociological research • Nozick: Weber’s rationality reshaped the world • Gadamer: Weber sought to eliminate every aspect of a worldview and all value judgments from science • Toulmin: rational, objective, quantitative preference

3. Objective Measures • Objective preferred • can measure • past profit, after tax • accurate preference input • “Rational” decision maker Accounting: Jensen - Agency Theory Economics: Williamson - Transaction Cost Analysis • Subjective • know conceptually, but can’t accurately measure • response to advertising

4. MAU Group Value Group members m=1 to N Criteria i=1 to k Alternatives j=1 to J

5. Dependence multiplicative group utility function under preferential dependence (Keeney & Raiffa, 1976, p. 531)

6. Keeney & Raiffa [1976] Group aggregation methods • Supra decision maker • verifies assumptions • determines utility/value functions • assesses scaling constants • makes interpersonal comparisons of utility “such questions are not easy”

7. Keeney & Raiffa [1976] • Participatory Group Decision • consensus would be needed • “Agreement on scaling constants would likely be difficult to achieve” • Group might select the alternative they all agree is best • If not, they may agree on alternatives that should be eliminated • At least provides basis for seeking constructive compromise

8. MAU ApproachesBose, Davey & Olson, Omega, 1997 • Determine group utility function 1a. Edwards:model the final decision maker 2. Voting • Or sum of ranks, or equivalent • Reach consensus informally 3a. Give decision maker justification

9. 1. Group Utility Function • Dyer & Miles, Operations Research [1976] • Space flight trajectory evaluation • Individual lottery comparison, aggregated multiple ways • Golabi, et al., Management Science [1981] • DOE solar energy projects • Individual preference elicitation, mean ratings by attribute to aggregate • Dyer & Lund, Interfaces [1982] • Petroleum product strategy selection • Individual elicitation through questionnaire, expert assignment of weights • Thomas, et al., The Journal of Applied Behavioral Science [1989] • Computer system installation • NGT, individual scoring; upper management scored for group • Reagan-Cirincione, et al., Interfaces [1991] • Insurance options • Task force scoring, weights assigned to each stakeholder

10. 2. Voting (or sum of ranks) • Lincoln & Rubin, IEEE Transactions SCM [1979] • Coal-fired plant strategy • Interview individuals; aggregate by method of marks, majority rule • Method of marks: best scenario 5, worst 1, rest by judgment • Edwards & von Winterfeldt, Risk Analysis [1987] • German energy, Arizona water control • Interview, obtained individual weights; rank sums to aggregate

11. 3. Consensus Seeking • Ulvila & Snider, Operations Research [1980] • Oil tanker safety negotiation • Interviews/questionnaires, used to sort alternatives for discussion • Keeney, et al., Operations Research [1986] • Electrical generation • Interviews with pairwise tradeoffs; one respondent’s results used because all were similar • Jones, et al., JORS [1990] • UK energy policy • Utilities assessed by individuals; basis for discussion & negotiation

12. ACCURATE PREFERENCE INPUT • incomplete information • uncertain measures • uncertain preferences • group participation • risk • time pressure: Edwards - how can you calculate expected utility in available time? • change competition complexity

13. Objective/Subjective • OBJECTIVE: what is convenient to model • ideal - eliminate bias, arbitrary judgment • extreme: cost/benefit analysis spanning years of measuring the unmeasurable • SUBJECTIVE: what people do to cope • value is subjective after all anyway • value is what MAUT, MCDA seeks to measure

14. Public Rationality • Bentham (Arrow, 1951): If we admit interpersonal comparisons of utility, we can order choices by function of utilities • Hume (Nozick 1993):Group of individual preferences could be irrational • Nozick [1993]: If a public decision, may need to bend to assure others • Rosenau [1992]: Discussion in the public sphere depends on force • The stronger argument always carries the day

15. Group Rationality • Buchanan & Tullock [1965]:only individuals can be rational, not groups • Individuals within groups likely to have different aims • Individuals within groups unlikely to take into account full marginal costs • Arrow [1974]:There cannot be a completely consistent meaning to collective rationality YET: Since individual activities interact, joint decision will be superior to separate decisions

16. EMPIRICAL EVIDENCE contrary to rational choice models Braybrooke & Lindblom [1969]; Simon [1985] Payne, et al. [1993] • Some problems never reach decision maker • decision makers often have simple maps of real problems • all alternatives not known, so decision makers do not have full, relevant information • individual altruism Tversky [1969] • systematic & predictable economic intransitivities Kahneman, Slovic & Tversky [1982] • people use heuristics rather than follow rational model

17. Organizational Aspects • Cyert & March [1959] • Decision making in organizations • Multiple actors • Inconsistent preferences

18. J. G. March [1978] Rational choice involves 2 guesses • future consequences of current actions • future preferences Individual preferences often appear fuzzy, inconsistent, to change over time Interpersonal comparisons by individual across time similar to aggregating across individuals We are left with the weak theorems of social welfare economics

19. Choices • Arrow: • Voting • Market mechanism • Administrative discretion • Rule of law preference endogenous • Dictatorship • Convention preference endogenous • Levitan & March [1957]: • Elected representatives making bargains

20. Amatra Sen [1982] • Aggregation rules • Utilitarian maximize weighted sum • Rawlsian maximize minimum • Knight: greater tendency toward inequality under voting than under the market

21. Arrow’s Impossibility • Voting leads to possibility of intransitivity (Nanson) • If exclude the possibility of interpersonal comparison of utility, only imposed or dictatorial orderings would be satisfactory • Black: under single-peaked preferences, majority decision leads to transitive result for odd number of voters • Median of first choice

22. Arrow’s Social Welfare Function Conditions • Positive association of social and individual values • Respond positively to changes in individual preference • Independence of irrelevant alternatives • Condition of citizen sovereignty • Free to select one alternative over another • Condition of nondictatorship • choice not based solely on the preferences of one individual • Summation of utilities • Based on ordinal, not cardinal, values

23. Arrow Conclusions • Interpersonal comparison of utilities has no meaning – so Arrow assumes only ordinal • Doctrine of voter sovereignty is incompatible with collective rationality • Individuals have incentive to misrepresent their orderings in a group setting • The market cannot be taken as a social welfare function since it cannot take into account altruism

24. Buchanan & Tullock • Arrow requires all votes be pairwise, which leads to cyclical majority • Whole proof makes no sense if applied to voting methods other than pairwise • If allow logrolling, problem of cyclical majority vanishes • But logrolling is politics • Time sequence very important • Arrow’s wording rules out all possible voting rules except unanimity if there is logrolling

25. Unanimity • Arrow: not majority, but unanimity required • Buchanan & Tullock: The majority rule has been elevated to the status which unanimity should occupy • Buchanan & Tullock: the rule of unanimity is the only rule indicated by widely acceptable welfare criteria • only this rule will produce Pareto-optimal solutions • Inherent interdependence of individual choices makes strategic behavior inevitable in politics

26. Consensus is not truth • Habermas [1991]: The criteria of rationality completely lacking in a consensus created by sophisticated opinion-molding services under the aegis of sham public interest • Feyerabend [1993]: Eisenstein in Potemkin knew that history needed to be improved in order to be exciting and meaningful

27. Rely on Experts? • Durkheim [1898]: Political opinions should rest on expert opinion • Dewey [Putnam 1992]:NO! Experts inevitably removed from common interests

28. PROCESS • Dewey [1888]: it is not the majority vote, but the process that forms the majority that matters • Arrow [1951]: Belief in democracy may be so strong that decisions arrived at democratically may be preferred to decisions reached other ways that are better for each individual • Buchanan & Tullock [1965]: Group decisions result from individual decisions combined through specific rules

29. Final Thoughts • Group preference function probably doesn’t exist • Arrow – don’t settle for less than unanimity • Unrealistic – have to proceed • American’s tend to use weighted sum • Choice – minsum or maximin • Other approaches can be applied • Focus on process, hope for agreement