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Optimal overconfidence in the presence of information manipulation

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  • Bo, Wang
  • Suli, Zheng

Abstract

This paper studies overconfidence in a decision-making model with an information manipulation stage. We demonstrate overconfidence discourages information manipulation and thereby improves allocation efficiency. The ideal level of overconfidence compromises between this discouragement effect and the information loss brought on by non-Bayesian weight. Overconfident leadership benefits the organisation and this conclusion is robust to a more general setting of information manipulation. Results of comparative static analysis are reported.

Suggested Citation

  • Bo, Wang & Suli, Zheng, 2023. "Optimal overconfidence in the presence of information manipulation," Economics Letters, Elsevier, vol. 231(C).
    • Handle: RePEc:eee:ecolet:v:231:y:2023:i:c:s0165176523003051
    DOI: 10.1016/j.econlet.2023.111280
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    References listed on IDEAS

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    More about this item

    Keywords

    Information manipulation; Overconfidence; Decision-making;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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