Seminar

Wisdom of the Crowd

Elena Panova (Université du Québec à Montréal)

June 24, 2010, 15:30–17:00

Toulouse

Room MF 323

BEE Seminar

Abstract

We analyze biases in the majority-vote outcomes, such as an ideological bias or a bias for status quo. We consider successive majority votes over two alternatives. A voter receives psychic benefit from voting for the alternative which he perceives as being most likely efficient, that is, matched with the state of Nature. The more confident he is in the efficiency of his voting decision, the higher his benefit from voting. Before each vote, the voters receive private signals on the prevailing state: only some voters receive informative signals. Initially, a voter knows whether he is informed or not. However, his own actions erase this knowledge: his posterior beliefs about the quality of his private information or self-confidence depend on his voting record. We find that the outcomes are positively correlated with the state. Therefore, a voter's self-confidence is higher when he pools with a majority. This effect creates demand for conformity, and induces a positive turnout by the uninformed voters. Their votes introduce systematic noise in the outcomes if and only if the state is sufficiently persistent.