Are We All Better Drivers than Average? Self-Perception and Biased Behaviour
AbstractThis Paper studies a model where individuals have imperfect self-knowledge and learning is costly. It shows that the endogenous decision to collect information before taking an action creates a systematic and testable bias in the aggregate behaviour of agents in the economy. More precisely, individuals distort the information acquisition procedure so as to favour the possibility of undertaking the action that generates the highest benefits in some states, even if it also generates the biggest losses in some others. The Paper thus explains within a rational framework why 80% of individuals may perceive themselves as being brighter, better drivers and more able entrepreneurs than their average peer. Applications to biases in career choices and judicial decisions are discussed.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3603.
Date of creation: Oct 2002
Date of revision:
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Find related papers by JEL classification:
- A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-03-14 (All new papers)
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