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Title:A model of overconfidence PDF Logo
Authors:Weinberg, Bruce A.
Issue Date:2009
Series/Report no.:IZA Discussion Papers 4285
Abstract:People use information about their ability to choose tasks. If more challenging tasks provide more accurate information about ability, people who care about and who are risk averse over their perception of their own ability will choose tasks that are not sufficiently challenging. Overestimation of ability raises utility by deluding people into believing that they are more able than they are in fact. Moderate overestimation of ability and overestimation of the precision of initial information leads people to choose tasks that raise expected output, however extreme overconfidence leads people to undertake tasks that are excessively challenging. Consistent with our results, psychologists have found that moderate overconfidence is both pervasive and advantageous and that people maintain such beliefs by underweighting new information about their ability.
Subjects:Overconfidence
behavioral economics
information processing
JEL:D03
D08
Persistent Identifier of the first edition:urn:nbn:de:101:1-2009082174
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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