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Does The Better-Than-Average Effect Show That People Are Overconfident?: Two Experiments

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  • Jean-Pierre Benoît
  • Juan Dubra
  • Don A. Moore

Abstract

We conduct two experimental tests of the claim that people are overconfident, using new tests of overplacement that are based on a formal Bayesian model. Our two experiments, on easy quizzes, find that people overplace themselves. More precisely, we find apparently overconfident data that cannot be accounted for by a rational population of expected utility maximizers who care only about money. The finding represents new evidence of overconfidence that is robust to the Bayesian critique offered by Benoît and Dubra (Jean-Pierre Benoît and Juan Dubra (2011). “Apparent Overconfidence.” Econometrica, 79, 1591–1625). We discuss possible limitations of our results.

Suggested Citation

  • Jean-Pierre Benoît & Juan Dubra & Don A. Moore, 2015. "Does The Better-Than-Average Effect Show That People Are Overconfident?: Two Experiments," Journal of the European Economic Association, European Economic Association, vol. 13(2), pages 293-329, April.
  • Handle: RePEc:bla:jeurec:v:13:y:2015:i:2:p:293-329
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    Citations

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    Cited by:

    1. Eggert, Håkan & Kataria, Mitesh & Lampi, Elina, 2016. "Do you trust me? – Go Fish! A Study on Trust and Fisheries Management," Working Papers in Economics 675, University of Gothenburg, Department of Economics.
    2. Barron, Kai & Gravert, Christina, 2018. "Confidence and Career Choices: An Experiment," Working Papers in Economics 715, University of Gothenburg, Department of Economics.
    3. Barron, Kai & Gravert, Christina, 2018. "Beliefs and actions: How a shift in confidence affects choices," MPRA Paper 84743, University Library of Munich, Germany.
    4. repec:hal:journl:halshs-01243584 is not listed on IDEAS
    5. Louis Lévy-Garboua & Muniza Askari & Marco Gazel, 2015. "Confidence Biases and Learning among Intuitive Bayesians," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01243584, HAL.
    6. Citci, Sadettin Haluk & Inci, Eren, 2016. "Career concerns and Bayesian overconfidence of managers," International Journal of Industrial Organization, Elsevier, vol. 46(C), pages 137-159.
    7. repec:eee:jeborg:v:138:y:2017:i:c:p:10-29 is not listed on IDEAS
    8. repec:eee:jbfina:v:84:y:2017:i:c:p:68-87 is not listed on IDEAS
    9. Cheung, Stephen L. & Johnstone, Lachlan, 2017. "True Overconfidence, Revealed through Actions: An Experiment," IZA Discussion Papers 10545, Institute for the Study of Labor (IZA).

    More about this item

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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