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Overconfident: Do You Put Your Money On It?

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  • Erik Hoelzl
  • Aldo Rustichini

Abstract

A group exhibits overconfidence if significantly more than half the group members declare to be better than the median in some characteristic. Overconfidence was found in verbal reports for a variety of characteristics and settings but was less often studied for choice behaviour. In an experiment we tested how perceived relative skill influences verbal and choice behaviour. Treatments varied task difficulty and payment. Choice behaviour changes from overconfidence to underconfidence when the task changes from easy and familiar to non-familiar. This effect is significant when monetary payments are at stake and weak when they are not. Copyright 2005 Royal Economic Society.

Suggested Citation

  • Erik Hoelzl & Aldo Rustichini, 2005. "Overconfident: Do You Put Your Money On It?," Economic Journal, Royal Economic Society, vol. 115(503), pages 305-318, April.
  • Handle: RePEc:ecj:econjl:v:115:y:2005:i:503:p:305-318
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