Abstract

We study the wisdom of the crowd in three sequential decision‐making tasks: the Balloon Analogue Risk Task (BART), optimal stopping problems, and bandit problems. We consider a behavior‐based approach, using majority decisions to determine crowd behavior and show that this approach performs poorly in the BART and bandit tasks. The key problem is that the crowd becomes progressively more extreme as the decision sequence progresses, because the diversity of opinion that underlies the wisdom of the crowd is lost. We also consider model‐based approaches to each task. This involves inferring cognitive models for each individual based on their observed behavior, and using these models to predict what each individual would do in any possible task situation. We show that this approach performs robustly well for all three tasks and has the additional advantage of being able to generalize to new problems for which there are no behavioral data. We discuss potential applications of the model‐based approach to real‐world sequential decision problems and discuss how our approach contributes to the understanding of collective intelligence.