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In: Economics

What is Groupthink and why can it be an impediment to sound decision-making? Briefly describe one...

What is Groupthink and why can it be an impediment to sound decision-making? Briefly describe one scenario where Groupthink could occur.

Solutions

Expert Solution

It can be mentioned that grouping is a situation in which the pressure from the group allows decision making to be in an imperfect manner which would usually be away from the rational or preferred alternative as an individual.

Groupthink can actually be an impediment to sound decision-making and this is because what happens on group think is that rather than preparing a sound alternative, the group pressure of satisfying everyone in the group might take conservative decisions which might not be decided under such circumstances. For example when there is a group of investors where only one of the investor is risk seeking but the economy is going really well and in this case was seeking might be a better alternative over the course of time due to the expansion of the economy and it would be better in investing in risky stocks. but due to group pressure the investors decide to invest in more conservative stocks which will feature less return over the course of time. In this way, group think gives less rational decision due to the succumbed pressures


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