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.
|Date of creation:||2011|
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- Diego García & Francesco Sangiorgi & Branko Urošević, 2007.
"Overconfidence and Market Efficiency with Heterogeneous Agents,"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 30(2), pages 313-336, February.
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- Fang, Hanming & Moscarini, Giuseppe, 2005. "Morale hazard," Journal of Monetary Economics, Elsevier, vol. 52(4), pages 749-777, May.
- Hanming Fang & Giuseppe Moscarini, 2003. "Morale Hazard," Cowles Foundation Discussion Papers 1422, Cowles Foundation for Research in Economics, Yale University.
- Hanming Fang & Giuseppe Moscarini, 2004. "Morale Hazard," Yale School of Management Working Papers ysm386, Yale School of Management.
- 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. Full references (including those not matched with items on IDEAS)
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