Groupthink: Collective delusions in organizations and markets

Arbeitspapier

This paper investigates collective denial and willful blindness in groups, organizations and markets. Agents with anticipatory preferences, linked through an interaction structure, choose how to interpret and recall public signals about future prospects. Wishful thinking (denial of bad news) is shown to be contagious when it is harmful to others, and self-limiting when it is beneficial. Similarly, with Kreps-Porteus preferences, willful blindness (information avoidance) spreads when it increases the risks borne by others. This general mechanism can generate multiple social cognitions of reality, and in hierarchies it implies that realism and delusion will trickle down from the leaders. The welfare analysis differentiates group morale from groupthink and identifies a fundamental tension in organizations' attitudes toward dissent. Contagious exuberance can also seize asset markets, generating investment frenzies and crashes.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: IZA Discussion Papers ; No. 7322

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Organizational Behavior; Transaction Costs; Property Rights ; General Equilibrium and Disequilibrium: Financial Markets ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; Expectations; Speculations ; Business Fluctuations; Cycles ; Financial Crises ; Information and Market Efficiency; Event Studies; Insider Trading
• Thema: groupthink ; organizational culture ; overconfidence ; optimism ; morale ; market exuberance ; manias speculative bubbles ; market crashes ; financial crises ; toxic assets ; wishful thinking ; cognitive dissonance ; cognitive biases anticipatory feelings ; resolution of uncertainty ; psychology

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Bénabou, Roland
• Ereignis: Veröffentlichung
• (wer): Institute for the Study of Labor (IZA)
• (wo): Bonn
• (wann): 2013

Weitere Informationen

• Handle: http://hdl.handle.net/10419/71631
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ