Graduate School of Management

GSOM Research Seminar Series

Compromise Effect in Group Choices

October 2, 2013
Lin Boldt, PhD, Assistant Professor of Marketing

Despite extensive research on the topic, the compromise effect has not been studied in group settings. This paper fills this void in the literature by proposing a model that captures the joint compromise effect (JCE), controlling for the individual compromise effect (ICE) and group members’ influence in joint decision making. Our three studies find strong empirical evidence in support of JCE. We find that greater ICE is associated with greater JCE. Interestingly, ICE tendency of the more accountable group member appears to be driving the JCE. Because compromise effects result in people selecting options not entirely consistent with their true preference, we investigate means to mitigate them. Our findings suggest that choice sets with fewer options help reduce both ICE and JCE. Further, Lack of Expertise consistently emerged as the biggest driver of ICE in our studies. This finding suggests that education of groups most vulnerable to compromise effects (e.g. women in the context of retirement planning from our study 3) may be an effective method to counter ICE, which in turn will also likely mitigate JCE.

Our hierarchical Bayes modeling approach permits inference at the individual and group level. We find that although on average groups exhibit JCE, some groups exhibit extreme-seeking behavior. Similarly extreme-seeking individuals also exist. What causes an individual or a group to be extreme seeking? We find that attribute importance imbalance (i.e. importance of one attribute dominates the other) drives individuals to be extreme-seeking. In the group setting, extreme-seeking individuals with converging preferences are found to exhibit joint extreme-seeking behavior. Our findings pertaining to individual and joint compromise effects in this paper have significant policy implications that are illustrated in the context of retirement planning involving families.

This research was conducted with Neeraj Arora, PhD, Department Chair of Marketing, Executive Director of the A.C. Nielsen Center for Marketing Research and the John P. Morgridge Chair in Business Administration at the University of Wisconsin-Madison.