The Emergence of Individual Knowledge in a Group Setting: Mitigating Cognitive Fallacies

Research in psychology has found that subjects regularly exhibit a conjunction fallacy in probability judgments. Additional research has led to the finding of other fallacies in probability judgment, including disjunction and conditional fallacies. Such analyses of judgments are critical because of the substantial amount of probability judgment done in accounting, business and organizational settings. However, most previous research has been conducted in the environment of a single decision maker. Since business and other organizational environments also employ groups, it is important to determine the impact of groups on such cognitive fallacies. This paper finds that groups substantially mitigate the impact of probability judgment fallacies among the sample of subjects investigated. The key finding of this paper is the analysis of the apparent manner in which groups make such decisions. A statistical analysis, based on a binomial distribution, suggests that groups investigated here did not use consensus. Instead, if any one member of the group has correct knowledge about the probability relationships, then the group uses that knowledge and does not exhibit fallacy in probability judgment. Having a computational model of the group decision making process provides a basis for developing computational models that can be used to simulate “mirror worlds” of reality or model decision making in real world settings.