A proper test of overconfidence

Benoît, Jean-Pierre, Dubra, Juan and Moore, Don (2008): A proper test of overconfidence. Unpublished.

Abstract

In this paper we conduct two proper tests of overconfidence. We reject the hypothesis "the data cannot be generated by a rational model" in both experiments.

• Item Type: MPRA Paper
• Language: English
• Keywords: Overconfidence; Better than Average; Experimental Economics; Irrationality; Signalling Models.
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D11 - Consumer Economics: Theory; D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search; Learning; Information and Knowledge; Communication; Belief

References

Alicke, M. D., M. L. Klotz, D. L. Breitenbecher, T. J. Yurak, and D.S. Vredenburg, (1995), "Personal contact, individuation, and the better-than-average effect," Journal of Personality and Social Psychology, 68(5), 804-825.

Amabile, T. "The social psychology of creativity: A componential conceptualization," Journal of Personality and Social Psychology, 45(2), 357-76.

Bem, D.J. (1967), "Self-perception theory: An alternative interpretation of cognitive dissonance phenomena," Psychological Review, 74(3), 183-200.

Bénabou, R. and J. Tirole (2002), "Self Confidence and Personal Motivation," Quarterly Journal of Economics, 117(3), 871-915.

Camerer, C. and Lovallo, D. (1999). Overconfidence and excess entry: an experimental approach', American Economic Review, 89(1), pp. 306--18.

Clark, J. and L. Friesen (2008), "Rational Expectations of Own Performance: An Experimental Study," forthcoming Economic Journal.

Festinger, L. (1954) "A Theory of Social Comparison Processes," Human Relations, 7(2), 117-140.

Healy, P.J. and D. Moore, (2007), "Bayesian Overconfidence," SSRN working paper: http://ssrn.com/abstract=1001820.

Hoelzl, E. and A. Rustichini, (2005), "Overconfident: do you put your money on it?" the Economic Journal, 115, pp. 305-18.

Kőszegi, B., (2006), "Ego Utility, Overconfidence, and Task Choice," Journal of the European Economic Association, 4(4), 673-707.

Svenson, O., (1981), "Are we all less risky and more skillful than our fellow drivers?" Acta Psychologica, 94, pp 143-148.

Trope, Y. (1975), "Seeking information about one's own ability as a determinant of choice among tasks," Journal of Personality and Social Psychology, 32(6), 1004-13.

Trope, Y. and P. Brickman (1975), "Difficulty and diagnosticity as determinants of choice among tasks," Journal of Personality and Social Psychology, 31(5), 918-25.

Weinstein, N. (1980), "Unrealistic Optimism about Future Life Events," Journal of Personality and Social Psychology, 39(5), 806-20.