TY  - RPRT
        AU  - Benabou, Roland
        TI  - Groupthink: Collective Delusions in Organizations and Markets
        PY  - 2013/Mar/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 7322
        UR  - https://www.iza.org/index.php/publications/dp7322
        AB  - 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.
        KW  - cognitive biases anticipatory feelings
KW  - organizational culture
KW  - overconfidence
KW  - optimism
KW  - morale
KW  - market exuberance
KW  - manias speculative bubbles
KW  - market crashes
KW  - financial crises
KW  - toxic assets
KW  - groupthink
KW  - wishful thinking
KW  - cognitive dissonance
KW  - resolution of uncertainty
KW  - psychology
        ER  -