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Tepper School of Business 9-2007 Bayesian Overconfidence
| Content Provider | Semantic Scholar |
|---|---|
| Author | Healy, Paul J. |
| Copyright Year | 2015 |
| Abstract | We study three distinct measures of overconfidence: (1) overestimation of one’s performance, (2) overplacement of one’s performance relative to others, and (3) overprecision in one’s belief about private signals. A new set of experiments verifies a strong negative link between overestimation and overprecision that depends crucially on task difficulty (the ‘hard-easy’ effect). We present a simple Bayesian model in which agents are uncertain about the underlying task difficulty. This model correctly predicts the observed regularities. Thus, we capture several observed patterns of overconfidence without assuming any implicit behavioral biases. ∗The authors wish to acknowledge the financial support of National Science Foundation Grant SES-0451736 as well as a CART grant from the Tepper School of Business at Carnegie Mellon University. We are indebted to Colin Camerer, Juan Dubra, Robin Hogarth, George Loewenstein, Ted O’Donoghue, Joel Sobel, Roberto Weber, and three anonymous reviewers for the 2007 Academy of Management Meeting Best Papers Proceedings. Zach Burns and the Pittsburgh Experimental Economics Laboratory provided invaluable assistance with data collection. The most current version of this paper is available online at http://healy.econ.ohio-state.edu. †1945 North High Street, Columbus, OH 43210. Phone: (614) 247-8876. Email: healy.52@osu.edu. ‡5000 Forbes Avenue, Pittsburgh, PA 15213. Phone: (412) 268-5968 Email: dmoore@cmu.edu. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://repository.cmu.edu/cgi/viewcontent.cgi?article=1337&context=tepper |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
