Democratic Peace and the Wisdom of Crowds: A Theory and Experimental Evidence of Collective Intelligence in Ultimatum Bargaining

DateApril 11, 2014

Time8:00am to 9:30am

Location
11377 Bunche Hall

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The well-established democratic peace finding that there are few, if any, clear cases of war between mature democratic states has generated a great deal of scholarly interest. In this paper, we propose a new theory for the democratic peace that highlights a previously unexplored advantage that democracies may have in crisis bargaining. Specifically, we argue that the diverse collection of independently-deciding individuals characteristic of democratic states is likely to produce better, more accurate predictions about the reservation price (i.e. the capabilities and resolve) of an opponent than individual leaders or even military experts in situations of ultimatum bargaining. As a result of this collective intelligence, we expect that bargaining with a group of diverse decision-makers will fail less often. In order to test these expectations and distinguish our mechanism from existing theories of the democratic peace, we use experimental data where subjects engage in multi-round ultimatum bargaining games. We compare the performance of offers from individuals to the performance of aggregated offers from diverse groups of individuals. We find strong support for the idea that collective decision-making decreases the likelihood of bargaining failure.

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