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Are We All Better Drivers than Average? Self-Perception and Biased Behaviour

  • Brocas, Isabelle
  • Carrillo, Juan D
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    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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    File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=3603
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    Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3603.

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    Date of creation: Oct 2002
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    Handle: RePEc:cpr:ceprdp:3603
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    1. 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.
    2. R. Benabou & J. Tirole, 1999. "Self-Confidence: Intrapersonal Strategies," Princeton Economic Theory Papers 00s1, Economics Department, Princeton University.
    3. Manove, M. & Padilla, A.J., 1997. "Banking (Conservatively) with Optimists," Papers 9718, Centro de Estudios Monetarios Y Financieros-.
    4. 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.
    5. 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).
    6. Matthew Rabin., 1995. "Moral Preferences, Moral Constraints, and Self-Serving Biases," Economics Working Papers 95-241, University of California at Berkeley.
    7. Andrew Caplin & John Leahy, 2004. "The supply of information by a concerned expert," Economic Journal, Royal Economic Society, vol. 114(497), pages 487-505, 07.
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