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Apparent Overconfidence

  • Juan Dubra

    ()

  • Jean-Pierre Benoit

It is common for a majority of people to rank themselves as better than average on simple tasks and worse than average on dificult tasks. The literature takes for granted that this apparent miscon?dence is problematic. We argue, however, that this behaviour is consistent with purely rational Bayesian updaters. In fact, better-than-average data by itself cannot be used to show overcon?dence; we indicate which type of data can be used. Our theory is consistent with empirical patterns found in the literature.

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File URL: http://www.um.edu.uy/docs/working_paper_um_cee_2011_06.pdf
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Paper provided by Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo. in its series Documentos de Trabajo/Working Papers with number 1106.

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Date of creation: 2011
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Handle: RePEc:mnt:wpaper:1106
Contact details of provider: Postal: Prudencio de Pena 2440, Montevideo 11600
Web page: http://www.um.edu.uy/cee/

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  1. Diego Garcia & Francesco Sangiorgi & Branko Urosevic, 2004. "Overconfidence and market efficiency with heterogeneous agents," Economics Working Papers 786, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Benoît, Jean-Pierre & Dubra, Juan, 2008. "Overconfidence?," MPRA Paper 765, University Library of Munich, Germany.
  3. Hanming Fang & Giuseppe Moscarini, 2004. "Morale Hazard," Yale School of Management Working Papers ysm386, Yale School of Management.
  4. Peng, Lin & Xiong, Wei, 2006. "Investor attention, overconfidence and category learning," Journal of Financial Economics, Elsevier, vol. 80(3), pages 563-602, June.
  5. Menkhoff, Lukas & Schmidt, Ulrich & Brozynski, Torsten, 2006. "The impact of experience on risk taking, overconfidence, and herding of fund managers: Complementary survey evidence," European Economic Review, Elsevier, vol. 50(7), pages 1753-1766, October.
  6. Antonio E. Bernardo & Ivo Welch, 2001. "On the Evolution of Overconfidence and Entrepreneurs," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(3), pages 301-330, 09.
  7. Jeremy Clark & Lana Friesen, 2006. "Overconfidence in Forecasts of Own Performance: An Experimental Study," Working Papers in Economics 06/09, University of Canterbury, Department of Economics and Finance.
  8. repec:bla:restud:v:72:y:2005:i:2:p:287-312 is not listed on IDEAS
  9. Burks, Stephen V. & Carpenter, Jeffrey P. & Götte, Lorenz & Rustichini, Aldo, 2010. "Overconfidence is a Social Signaling Bias," IZA Discussion Papers 4840, Institute for the Study of Labor (IZA).
  10. Grieco, Daniela & Hogarth, Robin M., 2009. "Overconfidence in absolute and relative performance: The regression hypothesis and Bayesian updating," Journal of Economic Psychology, Elsevier, vol. 30(5), pages 756-771, October.
  11. Juan D Carrillo & Isabelle Brocas, 2007. "Systematic errors in decision-making," Levine's Bibliography 122247000000001473, UCLA Department of Economics.
  12. Alvaro Sandroni & Francesco Squintani, 2007. "Overconfidence, Insurance, and Paternalism," American Economic Review, American Economic Association, vol. 97(5), pages 1994-2004, December.
  13. Erik Hoelzl & Aldo Rustichini, 2005. "Overconfident: Do You Put Your Money On It?," Economic Journal, Royal Economic Society, vol. 115(503), pages 305-318, 04.
  14. Jeff Dominitz, 1998. "Earnings Expectations, Revisions, And Realizations," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 374-388, August.
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