Are We All Better Drivers than Average? Self-Perception and Biased Behaviour
This Paper studies a model where individuals have imperfect self-knowledge and learning is costly. It shows that the endogenous decision to collect information before taking an action creates a systematic and testable bias in the aggregate behaviour of agents in the economy. More precisely, individuals distort the information acquisition procedure so as to favour the possibility of undertaking the action that generates the highest benefits in some states, even if it also generates the biggest losses in some others. The Paper thus explains within a rational framework why 80% of individuals may perceive themselves as being brighter, better drivers and more able entrepreneurs than their average peer. Applications to biases in career choices and judicial decisions are discussed.
|Date of creation:||Oct 2002|
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- Rabin, Matthew, 1995.
"Moral Preferences, Moral Constraints, and Self-Serving Biases,"
Department of Economics, Working Paper Series
qt97r6t5vf, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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- Andrew Caplin & John Leahy, 2004.
"The supply of information by a concerned expert,"
Royal Economic Society, vol. 114(497), pages 487-505, 07.
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"Banking (Conservatively) with Optimists,"
9718, Centro de Estudios Monetarios Y Financieros-.
- Juan D. Carrillo & Thomas Mariotti, 2000. "Strategic Ignorance as a Self-Disciplining Device," Review of Economic Studies, Oxford University Press, vol. 67(3), pages 529-544.
- Manove, M., 1995. "Entrepreneurs, Optimism, and the Competitive Edge," UFAE and IAE Working Papers 296.95, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Benabou, R. & Tirole, J., 2000.
"Self-Confidence: Intrapersonal Strategies,"
209, Princeton, Woodrow Wilson School - Public and International Affairs.
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