Rational truth-avoidance and self-esteem
We assume that people have beliefs about their abilities that generate self-esteem, and that self-esteem is valued intrinsically. Individuals face two choices; one of which strictly dominates the other in a pecuniary sense, but necessarily involves gathering information concerning their ability. We lay out the circumstances under which an individual may find it rational to reject the dominant choice, an act that, in psychology is described as "avoiding the situation". We then go on to show that the incentive to avoid the truth is increasing in income/wealth and decreasing in self-esteem, the perceived accuracy of one's self-assessment, and the role that luck plays in generating opportunities.
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Volume (Year): 42 (2009)
Issue (Month): 1 (February)
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- Simon Gervais & Terrance Odean, .
"Learning To Be Overconfident,"
Rodney L. White Center for Financial Research Working Papers
05-97, Wharton School Rodney L. White Center for Financial Research.
- Simon Gervais & Terrance Odean, . "Learning To Be Overconfident," Rodney L. White Center for Financial Research Working Papers 5-97, Wharton School Rodney L. White Center for Financial Research.
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