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The virtue of overconfidence when you are not perfectly informed

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  • Zhou, Deqing

Abstract

Based on Foster and Viswanathan (1994), this work investigates how the heterogeneous beliefs affect equilibrium results when agents are informed asymmetrically. We find that the equilibrium remains the same whether or not the better informed agent is overconfident, but it is a virtue for the less informed agent to be overconfident since this helps him survive in competing with the other less informed agents, however, the less informed agents cannot earn more than the better informed agent, no matter how overconfident he is.

Suggested Citation

  • Zhou, Deqing, 2015. "The virtue of overconfidence when you are not perfectly informed," Economic Modelling, Elsevier, vol. 47(C), pages 105-110.
    • Handle: RePEc:eee:ecmode:v:47:y:2015:i:c:p:105-110
    DOI: 10.1016/j.econmod.2015.02.010
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    References listed on IDEAS

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    Cited by:

    1. Yin, Xile & Li, Jianbiao & Bao, Te, 2019. "Does overconfidence promote cooperation? Theory and experimental evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 79(C), pages 119-133.
    2. Zhou, Deqing & Zhen, Fang, 2021. "Risk aversion, informative noise trading, and long-lived information," Economic Modelling, Elsevier, vol. 97(C), pages 247-254.

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