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Overconfidence?

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  • Benoît, Jean-Pierre
  • Dubra, Juan

Abstract

Many studies have shown that people display an apparent overconfidence. In particular, it is common for a majority of people to describe themselves as better-than-average. The literature takes for granted that this better-than-average effect is problematic. We argue, however, that, even accepting these studies on their own terms, there is nothing at all wrong with a strict majority of people rating themselves above the median.

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File URL: http://mpra.ub.uni-muenchen.de/6017/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 6017.

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Date of creation: Oct 2007
Date of revision: Nov 2007
Handle: RePEc:pra:mprapa:6017

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Keywords: Overconfidence; Better than Average; Experiments; Irrationality; Signalling Models;

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References

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  1. Antonio Bernardo & Ivo Welch, 2001. "On the Evolution of Overconfidence and Entrepreneurs," Yale School of Management Working Papers, Yale School of Management ysm211, Yale School of Management, revised 01 Nov 2003.
  2. Ulrike Malmendier & Geoffrey Tate, 2004. "CEO Overconfidence and Corporate Investment," NBER Working Papers 10807, National Bureau of Economic Research, Inc.
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  4. Bruno Biais & Denis Hilton & Karine Mazurier & Sébastien Pouget, 2005. "Judgemental Overconfidence, Self-Monitoring, and Trading Performance in an Experimental Financial Market," Review of Economic Studies, Oxford University Press, vol. 72(2), pages 287-312.
  5. Erik Hoelzl & Aldo Rustichini, 2005. "Overconfident: Do You Put Your Money On It?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 115(503), pages 305-318, 04.
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  7. Wang, F. Albert, 2001. "Overconfidence, Investor Sentiment, and Evolution," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 10(2), pages 138-170, April.
  8. Ján Zábojník, 2004. "A model of rational bias in self-assessments," Economic Theory, Springer, Springer, vol. 23(2), pages 259-282, January.
  9. Moore, Don A., 2007. "Not so above average after all: When people believe they are worse than average and its implications for theories of bias in social comparison," Organizational Behavior and Human Decision Processes, Elsevier, Elsevier, vol. 102(1), pages 42-58, January.
  10. Jose A. Scheinkman & Wei Xiong, 2003. "Overconfidence and Speculative Bubbles," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 111(6), pages 1183-1219, December.
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  16. Brozynski, Torsten & Menkhoff, Lukas & Schmidt, Ulrich, 2004. "The Impact of Experience on Risk Taking, Overconfidence, and Herding of Fund Managers: Complementary Survey Evidence," Hannover Economic Papers (HEP), Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät dp-292, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  17. Ledyard, John O., . "The Scope of the Hypothesis of Bayesian Equilibrium," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 532, California Institute of Technology, Division of the Humanities and Social Sciences.
  18. Lu�s Santos-Pinto & Joel Sobel, 2005. "A Model of Positive Self-Image in Subjective Assessments," American Economic Review, American Economic Association, American Economic Association, vol. 95(5), pages 1386-1402, December.
  19. Francesco Squintani & Alvaro Sandroni, 2007. "Overconfidence, Insurance and Paternalism," Economics Discussion Papers, University of Essex, Department of Economics 643, University of Essex, Department of Economics.
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  21. Markus Noth & Martin Weber, 2003. "Information Aggregation with Random Ordering: Cascades and Overconfidence," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 113(484), pages 166-189, January.
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Citations

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Cited by:
  1. Merkle, Christoph & Weber, Martin, 2011. "True overconfidence: The inability of rational information processing to account for apparent overconfidence," Organizational Behavior and Human Decision Processes, Elsevier, Elsevier, vol. 116(2), pages 262-271.
  2. Cruces, Guillermo & Perez Truglia, Ricardo & Tetaz, Martin, 2011. "Biased Perceptions of Income Distribution and Preferences for Redistribution: Evidence from a Survey Experiment," IZA Discussion Papers 5699, Institute for the Study of Labor (IZA).
  3. Juan Dubra & Jean-Pierre Benoit, 2011. "Apparent Overconfidence," Documentos de Trabajo/Working Papers, Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo. 1106, Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo..
  4. Markus Mobius & Muriel Niederle & Paul Niehaus & Tanya S. Rosenblat, 2011. "Managing self-confidence: theory and experimental evidence," Working Papers, Federal Reserve Bank of Boston 11-14, Federal Reserve Bank of Boston.
  5. Grieco, Daniela & Hogarth, Robin M., 2009. "Overconfidence in absolute and relative performance: The regression hypothesis and Bayesian updating," Journal of Economic Psychology, Elsevier, Elsevier, vol. 30(5), pages 756-771, October.
  6. Holger Herz & Daniel Schunk & Christian Zehnder, 2013. "How do judgmental overconfidence and overoptimism shape innovative activity?," ECON - Working Papers, Department of Economics - University of Zurich 106, Department of Economics - University of Zurich, revised Nov 2013.
  7. Néstor Gándelman & Rubén Hernández-Murillo, 2009. "The impact of inflation and unemployment on subjective personal and country evaluations," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue May, pages 107-126.
  8. Juan Dubra & Rafael Di Tella, 2011. "Free to Punish? The American Dream and the harsh Treatment of Criminals," Documentos de Trabajo/Working Papers, Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo. 1105, Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo..
  9. Ertac, Seda, 2011. "Does self-relevance affect information processing? Experimental evidence on the response to performance and non-performance feedback," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 80(3), pages 532-545.
  10. Akiko Maruyama, 2010. "Learning about one’s own type in two-sided search," GRIPS Discussion Papers, National Graduate Institute for Policy Studies 10-26, National Graduate Institute for Policy Studies.
  11. Benoît, Jean-Pierre & Dubra, Juan & Moore, Don, 2009. "Does the Better-Than-Average Effect Show That People Are Overconfident?: An Experiment," MPRA Paper 13168, University Library of Munich, Germany.
  12. Ravazzolo, Francesco & Røisland, Øistein, 2011. "Why do people place lower weight on advice far from their own initial opinion?," Economics Letters, Elsevier, Elsevier, vol. 112(1), pages 63-66, July.

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