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Self-Confidence: Intrapersonal Strategies

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  • Bénabou, Roland
  • Tirole, Jean

Abstract

This paper explains why people value self-confidence, and how this concern shapes their informational strategies and intertemporal decisions. The theory has applications in areas as diverse as labour supply, savings and investment, or education and career decisions. People generally have imperfect knowledge about their abilities, which in most tasks are complementary to effort. Self-confidence thus enhances motivation, and this gives a time--inconsistent individual a strong incentive to build up the self-esteem of his future selves, so as to limit their procrastination. The benefits of confidence-maintenance must, however, be traded off against the risks of overconfidence. Moreover, rational inference implies that the individual cannot systematically fool himself. The model explains why people often choose to remain ignorant about their true abilities, or 'blind' to important signals from their work, personal or market environment; and why they sometimes deliberately impair their own performance or choose overambitious tasks in which they are sure to fail (self-handicapping). It also provides a formal account of (endogenously) selective memory or awareness, such as the tendency to remember one's successes more than one's failures. This result, in turn, helps explain why most people have overoptimistic assessments of their own abilities and accomplishments (self-serving beliefs). Another important result is that this 'psychological immune system' can lead to multiple intrapersonal equilibria in cognitive strategies, self confidence, and behaviour. Moreover, while 'positive thinking' and similar forms of self--deception can improve ex-ante welfare, they can also be self-defeating.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2580.

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Date of creation: Oct 2000
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Handle: RePEc:cpr:ceprdp:2580

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Related research

Keywords: Memory; Motivation; Psychology and Economics; Self-Confidence; Self-Control; Self-Deception; Self-Esteem; Time-Inconsistency;

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References

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  1. O'Donoghue, Ted & Rabin, Matthew, 1997. "Doing It Now or Later," Department of Economics, Working Paper Series qt7t44m5b0, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  2. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  3. Martin J Osborne & Ariel Rubinstein, 2009. "A Course in Game Theory," Levine's Bibliography 814577000000000225, UCLA Department of Economics.
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Citations

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Cited by:
  1. Benabou, R. & Tirole, J., 2000. "Self-Confidence and Social Interactions," Papers 210, Princeton, Woodrow Wilson School - Public and International Affairs.
  2. O'Donoghue, Ted & Rabin, Matthew, 2002. "Procrastination on Long-Term Projects," Department of Economics, Working Paper Series qt1bz181nv, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  3. Gollier, Christian & Zeckhauser, Richard, 2003. "Collective Investment Decision Making with Heterogeneous Time Preferences," IDEI Working Papers 198, Institut d'Économie Industrielle (IDEI), Toulouse.
  4. Juan D. Carrillo & Mathias Dewatripont, 2005. "Promises, Promises, ..," Levine's Bibliography 172782000000000058, UCLA Department of Economics.
  5. Carrillo, Juan D & Dewatripont, Mathias, 2001. "Promises, Promises…," CEPR Discussion Papers 2680, C.E.P.R. Discussion Papers.
  6. Isabelle Brocas & Juan D. Carrillo, 2005. "Biases in Perceptions, Beliefs and Behavior," Levine's Bibliography 172782000000000063, UCLA Department of Economics.
  7. Brocas, Isabelle & Carrillo, Juan D, 2002. "Are We All Better Drivers than Average? Self-Perception and Biased Behaviour," CEPR Discussion Papers 3603, C.E.P.R. Discussion Papers.
  8. D.Dragone, 2005. "Incoerenza Dinamica ed Autocontrollo: Proposta per un'Analisi Interdisciplinare," Working Papers 549, Dipartimento Scienze Economiche, Universita' di Bologna.

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