A body of empirical work documents that most people believe they are above average in a variety of skills and abilities. This paper argues that such evidence does not necessarily imply that people process information in an irrational way. I build a model in which people can learn about their abilities at a cost of foregone production. Individuals in this model keep testing their abilities until their self-assessments become favorable enough, at which point they stop. This way, a disproportionately large share of the population ends up with a high opinion about their abilities. Copyright Springer-Verlag Berlin/Heidelberg 2004
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Article provided by Springer in its journal Economic Theory.
Volume (Year): 23 (2004) Issue (Month): 2 (January) Pages: 259-282 Download reference. The following formats are available: HTML
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Benoît, Jean-Pierre & Dubra, Juan, 2008.
"Overconfidence?,"
MPRA Paper
8879, University Library of Munich, Germany.
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Other versions:
Benoît, Jean-Pierre & Dubra, Juan, 2007.
"Overconfidence?,"
MPRA Paper
6017, University Library of Munich, Germany, revised Nov 2007.
[Downloadable!]