Week 7 - Groups and Group Decision Making

Group Decision Task: Necklace Problem

  • Scenario recap:

    • Woman buys necklace priced at \$78.

    • Pays with a check for \$100.

    • Jeweller lacks \$22 change ➔ exchanges the check for \$100 cash with neighbouring merchant.

    • Gives woman necklace + \$22 change; she leaves.

    • Check bounces ➔ jeweller must reimburse neighbouring merchant \$100.

    • Bank imposes a \$15 fee.

    • Necklace had cost jeweller \$39 wholesale.

  • Net-loss calculation (lecture solution):

    • Costs borne by jeweller: 39 + 22 + 15 = 76

    • Temporarily receives 100 from neighbour but immediately repays 100 (net 0 from that exchange).

    • Final net loss: \$76, expressed as 39 + 22 + 15 - 100 + 100 = 76.

  • Pedagogical purpose:

    • Used twice (solo vs. paired) to illustrate how group discussion can change accuracy, process, and confidence.

    • Reflection prompts: “Did you start with the right answer? Did you end with the right answer? What was the process?”

Why Do Humans Form Groups?

  • Need satisfaction:

    • Belonging, identity, social support, validation.

  • Resource dilemma:

    • Pooling labour, knowledge, physical resources ➔ higher potential outputs than individuals can reach alone.

  • Collaborative pursuit of shared goals:

    • Complex tasks (e.g., product launches, scientific discovery) require diverse skill sets and coordination.

  • Implied links to earlier decision-making lectures:

    • Groups can mitigate individual cognitive biases but may introduce new collective biases.

Individuals vs. Groups: Social Facilitation & Impairment

  • Classic empirical findings:

    • Triplett (1898): Cyclists rode faster when racing others vs. racing alone.

    • Chen (1937): Worker ants dug >3\times as much sand per ant when others present.

    • Platt, Yaksh & Darby (1967): Animals consumed more food when conspecifics present.

    • Zajonc et al. (1965): Cockroaches’ performance dropped on difficult mazes when others watched.

  • Generalised model (Zajonc’s social facilitation theory):

    1. Presence of others ➔ increased physiological arousal.

    2. Arousal strengthens dominant (well-learnt) responses.

    3. Outcomes:

    • Improved performance on simple or practised tasks.

    • Impaired performance on novel or complex tasks.

  • Practical/ethical implications:

    • Workplace design: open offices may boost routine productivity but hinder creative or complex work.

    • Performance evaluations: public settings can stress novices.

Group Dynamics Framework

  • Steiner–Hackman formula:
    \text{Group Performance} = \text{Potential Performance} - \text{Process Losses} + \text{Process Gains}

  • Potential performance is the hypothetical best case if members perfectly coordinated and contributed fully.

Process Losses (Cost Side)

  • Shared-Information Bias

    • Groups preferentially discuss facts all members know, neglecting uniquely held data.

    • Leads to sub-optimal decisions (Faulmüller et al., 2010).

  • Coordination Loss

    • Time/effort spent scheduling, allocating roles, resolving conflict ➔ productive capacity diverted.

    • Difficulty in gauging each member’s optimal contribution.

  • Social Loafing (Ringelmann Effect)

    • Individuals exert less effort when contributions are pooled.

    • Empirical example: 3-person rope-pull teams operated at 85\% of summed capacity; 8-person teams at 37\%.

  • Groupthink

    • Conformity pressure suppresses dissent ➔ premature consensus.

    • Historical example: Bay of Pigs invasion fiasco.

    • Symptoms: illusion of unanimity, suppression of alternatives, direct pressure on dissenters.

  • Production Blocking

    • Only one person speaks at a time; others forget ideas or fail to listen (Diehl & Stroebe, 1987).

  • Reduced Creativity

    • Monitoring others and waiting turns decreases divergent thinking (Gallupe et al., 1994).

Process Gains (Benefit Side)

  • Error Correction

    • More eyes notice inaccuracies and fallacies (Ziller, 1957).

  • Collective & Transactive Memory

    • Distributed storage: members specialise in different knowledge domains and cue each other (Forsyth, 2010).

  • Increased Information Pool

    • When unique data are successfully shared, total decision-relevant information grows (Johnson & Johnson, 2012).

  • Enhanced Rationality

    • Groups better at ignoring misleading private signals when conflicting with public evidence (Fahr & Irlenbusch, 2011).

Electronic vs. Face-to-Face Groups

  • Electronic (computer-mediated) brainstorming procedures:

    • Each member types ideas individually; system instantly shares to group.

  • Demonstrated advantages:

    • Greater idea quantity & quality vs. face-to-face (Dennis & Valacich, 1993).

    • Reduces production blocking (parallel input) and evaluation apprehension (anonymity or less salience).

  • Practical application:

    • Use for geographically dispersed teams, or when idea generation requires maximal creativity without social inhibition.

Integrated Implications for Business Decisions

  • Managers must weigh potential performance gains against anticipated process losses.

  • Structural solutions:

    • Assign information-sharing roles to combat shared-information bias.

    • Use clear individual accountability metrics to fight social loafing.

    • Appoint devil’s advocate or use Delphi techniques to minimise groupthink.

    • Adopt electronic brainstorming for ideation phases, face-to-face for convergence phases.

  • Ethical considerations:

    • Ensure minority voices are heard; suppressing them not only hurts decision quality but can raise moral responsibility issues.

    • Group structures should avoid exploiting labour via diffusion of responsibility (social loafing amplifies this risk).

Numerical & Conceptual Summary

  • Necklace problem illustrates financial loss accounting: \$76.

  • Social facilitation model predicts performance change as function f(\text{arousal},\text{task complexity}).

  • Ringelmann ratios: n=3 \Rightarrow 0.85 efficiency, n=8 \Rightarrow 0.37.

  • Group performance equation formalises balance of gains and losses.

Connections to Prior Material

  • Builds on bounded rationality concept: individual limitations can be offset by group memory and rationality, yet compounded by biases like groupthink.

  • Echoes earlier heuristics lecture: shared-information bias parallels availability heuristic – groups discuss what is mentally "available" to all.

Key Takeaways for Exam Preparation

  • Memorise the Steiner equation and be able to list at least three process losses and three gains with examples.

  • Understand social facilitation: know when presence helps or hinders.

  • Be able to calculate and explain the necklace problem (show your working!).

  • Apply electronic vs. face-to-face evidence to case-study scenarios.

  • Prepare to discuss practical interventions that enhance group decision quality while minimising ethical risks.

Workshop:

Q1 Are we always more effective in our decision-making when we work alone? Why/Why not?

Q2 When do we work better or worse in groups?

Q3 What group dynamics do we need consider when we think about whether it’s worth joining a group?

Q4 What are some of the challenges encountered in group decision-making?

Reading list

Baron, R. S. (2005). So right it’s wrong: Groupthink and the ubiquitous nature of polarized group decision making. Advances in experimental social psychology, 37(2), 219-253.

Bénabou, R. (2012). Groupthink: Collective delusions in organizations and markets. Review of Economic Studies, 80(2), 429-462.

Dennis, A. R., & Valacich, J. S. (1993). Computer Brainstorms: More Heads Are Better Than One. Journal of Applied Psychology, 78(4), 531-537.

Fahr, R., & Irlenbusch, B. (2011). Who follows the crowd—Groups or individuals?. Journal of Economic Behavior & Organization, 80(1), 200-209.

(Links to an external site.Gallupe, R. B., Cooper, W. H., Grisé, M. L., & Bastianutti, L. M. (1994). Blocking electronic brainstorms. Journal of applied psychology, 79(1), 77.

Gigone, D., & Hastie, R. (1997). The impact of information on small group choice. Journal of personality and social psychology, 72(1), 132.

Hackman, J. R., & Morris, C. G. (1975). Group tasks, group interaction process, and group performance effectiveness: A review and proposed integration. Advances in experimental social psychology, 8, 45-99.

Kravitz, D. A., & Martin, B. (1986). Ringelmann rediscovered: The original article.

Stasser, G., & Titus, W. (1985). Pooling of unshared information in group decision making: Biased information sampling during discussion. Journal of personality and social psychology, 48(6), 1467.

Stroebe, W., & Diehl, M. (1994). Why groups are less effective than their members: on productivity losses in idea-generating groups. European review of social psychology, 5(1), 271-303.

Williams, K., Harkins, S. G., & Latané, B. (1981). Identifiability as a deterrant to social loafing: Two cheering experiments. Journal of Personality and Social Psychology, 40(2), 303.

Zajonc, R. B. (1965). Social facilitation. Science, 149(3681), 269-274.

Ziller, R. C. (1957). Group size: A determinant of the quality and stability of group decisions. Sociometry, 20(2), 165-173.