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Overconfidence in Forecasts of Own Performance: An Experimental Study

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Author Info
Jeremy Clark
Lana Friesen

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Abstract

Systematic overconfidence by individuals regarding their abilities and prospects could have important economic consequences. But overconfidence has received little direct testing within economics. We use experiments to test for overconfidence in people's forecasts of their absolute or relative performance in two unfamiliar tasks. Given their chosen effort, participants have incentives to forecast accurately, with opportunities for feedback, learning and revision. Forecasts are evaluated at aggregate and individual levels. We find zero mean error or underconfidence far more prevalent than overconfidence. Underconfidence is greatest in forecasts of absolute rather than relative performance and among those using greater effort quantity or quality. Copyright © The Author(s). Journal compilation © Royal Economic Society 2009.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0297.2008.02211.x
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Publisher Info
Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 119 (2009)
Issue (Month): 534 (01)
Pages: 229-251
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Handle: RePEc:ecj:econjl:v:119:y:2009:i:534:p:229-251

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  1. Nicolas Jacquemet & Jean-Louis Rullière & Isabelle Vialle, 2008. "Monitoring optimistic agents," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00272928_v1, HAL. [Downloadable!]
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