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Overconfidence in Forecasts of Own Performance: An Experimental Study

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Author Info
Jeremy Clark () (University of Canterbury)
Lana Friesen

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Abstract

Overconfidence can have important economic consequences, but has received little direct testing within the discipline. We test for overconfidence in forecasts of own absolute or relative performance in two unfamiliar experimental tasks. Given their choice of effort at the tasks, participants have incentives to forecast accurately, and have opportunities for feedback, learning and revision. Forecast accuracy is evaluated at both the aggregate level, and at the individual level using realized outcomes. We find very limited evidence of overconfidence, with zero mean error or under-confidence more prevalent. Under-confidence is greatest in tasks with absolute rather than relative win criteria, often among subjects using greater or "smarter" effort.

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File URL: http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/0609.pdf
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Publisher Info
Paper provided by University of Canterbury, Department of Economics in its series Working Papers in Economics with number 06/09.

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Length: 41 pages
Date of creation: 01 Mar 2006
Date of revision:
Handle: RePEc:cbt:econwp:06/09

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Related research
Keywords: Overconfidence; forecast errors; self-assessment;

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Find related papers by JEL classification:
C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  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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