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.
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- Andrew Caplin & John Leahy, 2001.
"Psychological Expected Utility Theory And Anticipatory Feelings,"
The Quarterly Journal of Economics,
MIT Press, vol. 116(1), pages 55-79, February.
- Caplin, Andrew & Leahy, John, 1997. "Psychological Expected Utility Theory and Anticipatory Feelings," Working Papers 97-37, C.V. Starr Center for Applied Economics, New York University.
- Matthew Rabin., 1995.
"Moral Preferences, Moral Constraints, and Self-Serving Biases,"
Economics Working Papers
95-241, University of California at Berkeley.
- 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.
- Roland Benabou & Jean Tirole, 1999.
"Self-Confidence: Intrapersonal Strategies,"
152, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
- R. Benabou & J. Tirole, 1999. "Self-Confidence: Intrapersonal Strategies," Princeton Economic Theory Papers 00s1, Economics Department, Princeton University.
- Bénabou, Roland & Tirole, Jean, 2000. "Self-Confidence: Intrapersonal Strategies," CEPR Discussion Papers 2580, C.E.P.R. Discussion Papers.
- Benabou, R. & Tirole, J., 2000. "Self-Confidence: Intrapersonal Strategies," Papers 209, Princeton, Woodrow Wilson School - Public and International Affairs.
- Manove, M. & Padilla, A.J., 1997.
"Banking (Conservatively) with Optimists,"
9718, Centro de Estudios Monetarios Y Financieros-.
- Caplin, A. & Leahy, J., 1999.
"The Supply of Information by a Concerned Expert,"
99-08, C.V. Starr Center for Applied Economics, New York University.
- Carrillo, Juan D & Mariotti, Thomas, 2000. "Strategic Ignorance as a Self-Disciplining Device," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 529-44, July.
- 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).
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