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

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

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  1. 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

  2. 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?

  3. 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

  4. .. .. .. .. .. .. .. .. .. .. 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

  5. 50 $125 40 $90 30 $75 20 $20 $1 10 10 30 60 70 50 20 40 Committees and elections Options and incentives Alternatives: Points on the Chalkboard

  6. 140 120 80 60 40 20 20 140 120 180 160 80 60 100 40 Committees and elections Options and incentives conflict and incentives

  7. 140 120 80 60 40 20 20 140 120 180 160 80 60 100 40 Rules and Institutions Equilibrium and cooperative game models (e.g the core) tend to be the best models of the outcome

  8. 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.

  9. 4 3 2 5 1

  10. Linear Influence Hypothesis Dyadic Equilibrium Conforming

  11. 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

  12. The institutional design was successful: Information Aggregation takes place The general informational environment is important

  13. Polar Cases: Full Information About the State Polar Cases: No Information About State

  14. COMMITTEE NEVER LEARNS THE TRUTH COMMITTEE LEARNS TRUTH AFTER EVERY DECISION

  15. Information Aggregation Does not Deteriorate Over Time

  16. 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.

  17. SOURCES OF INFORMATION LINEAR INFLUENCE MODEL Insider recommendations are potential sources of information Feedback .51,.51 No Feedback .51, .48

  18. 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

  19. The mechanism contains sources of information in addition to the initial proposals by the insiders

  20. Lack of trust in initial recommendations causes people to look for other sources of information such as amendments to proposals.

  21. 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

  22. Individual voting behavior evolves away from a state of completely uniformed

  23. 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

  24. THE END

  25. ADDITIONAL OBSERVATIONS

  26. New Proposals Are Closer to the Fully Informed Equilibrium than the Previous Proposal

  27. Total Pivotal

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