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Confidence, Self-Selection, and Bias in the Aggregate

Author

Listed:
  • Benjamin Enke
  • Thomas Graeber
  • Ryan Oprea

Abstract

The influence of behavioral biases on aggregate outcomes depends in part on self-selection: whether rational people opt more strongly into aggregate interactions than biased individuals. In betting market, auction and committee experiments, we document that some errors are strongly reduced through self-selection, while others are not affected at all or even amplified. A large part of this variation is explained by differences in the relationship between confidence and performance. In some tasks, they are positively correlated, such that self-selection attenuates errors. In other tasks, rational and biased people are equally confident, such that self-selection has no effects on aggregate quantities.

Suggested Citation

  • Benjamin Enke & Thomas Graeber & Ryan Oprea, 2023. "Confidence, Self-Selection, and Bias in the Aggregate," American Economic Review, American Economic Association, vol. 113(7), pages 1933-1966, July.
    • Handle: RePEc:aea:aecrev:v:113:y:2023:i:7:p:1933-66
    DOI: 10.1257/aer.20220915
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    Cited by:

    1. Grunewald, Andreas & Klockmann, Victor & von Schenk, Alicia & von Siemens, Ferdinand, 2024. "Are biases contagious? The influence of communication on motivated beliefs," W.E.P. - Würzburg Economic Papers 109, University of Würzburg, Department of Economics.

    More about this item

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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