Skill or Luck? Biases of Rational Agents
This paper shows why, in a world with differing priors, rational agents tend to attribute their own success more to skill and their failure more to bad luck than an outsider. It further shows why each agent in a group might think he or she is the best, why an agent might overestimate the control he has over the outcome, and why two agents' estimated contributions often add up to more than 100%. Underlying all these phenomena is a simple and robust mechanism that endogenously generates overoptimism about one's own actions. The paper also shows how these biases hinder learning and discusses some implications for organizations.
|Date of creation:||09 Aug 2002|
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References listed on IDEAS
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- Morris, Stephen, 1995. "The Common Prior Assumption in Economic Theory," Economics and Philosophy, Cambridge University Press, vol. 11(02), pages 227-253, October.
- Harsanyi, John C., 1994.
"Games with Incomplete Information,"
Nobel Prize in Economics documents
1994-1, Nobel Prize Committee.
- Glenn Ellison, 2000.
"Evolving Standards for Academic Publishing: A q-r Theory,"
NBER Working Papers
7805, National Bureau of Economic Research, Inc.
- Glenn Ellison, 2002. "Evolving Standards for Academic Publishing: A q-r Theory," Journal of Political Economy, University of Chicago Press, vol. 110(5), pages 994-1034, October.
- Edward P. Lazear, 2001. "The Peter Principle: Promotions and Declining Productivity," NBER Working Papers 8094, National Bureau of Economic Research, Inc.
- Matthew Rabin & Joel L. Schrag, 1999. "First Impressions Matter: A Model of Confirmatory Bias," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 37-82.
- J. Michael Harrison & David M. Kreps, 1978. "Speculative Investor Behavior in a Stock Market with Heterogeneous Expectations," The Quarterly Journal of Economics, Oxford University Press, vol. 92(2), pages 323-336.
- Robert Wilson, 1977. "A Bidding Model of Perfect Competition," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 511-518.
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