EconStor >
Federal Reserve Bank of Boston >
Working Paper Series, Federal Reserve Bank of Boston >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/55580
  
Title:Managing self-confidence: Theory and experimental evidence PDF Logo
Authors:Möbius, Markus M.
Niederle, Muriel
Niehaus, Paul
Rosenblat, Tanya S.
Issue Date:2011
Series/Report no.:Working paper series // Federal Reserve Bank of Boston 11-14
Abstract:Evidence from social psychology suggests that agents process information about their own ability in a biased manner. This evidence has motivated exciting research in behavioral economics, but also garnered critics who point out that it is potentially consistent with standard Bayesian updating. We implement a direct experimental test. We study a large sample of 656 undergraduate students, tracking the evolution of their beliefs about their own relative performance on an IQ test as they receive noisy feedback from a known data-generating process. Our design lets us repeatedly measure the complete relevant belief distribution incentive-compatibly. We find that subjects (1) place approximately full weight on their priors, but (2) are asymmetric, over-weighting positive feedback relative to negative, and (3) conservative, updating too little in response to both positive and negative signals. These biases are substantially less pronounced in a placebo experiment where ego is not at stake. We also find that (4) a substantial portion of subjects are averse to receiving information about their ability, and that (5) less confident subjects are more likely to be averse. We unify these phenomena by showing that they all arise naturally in a simple model of optimally biased Bayesian information processing.
JEL:C91
C93
D83
Document Type:Working Paper
Appears in Collections:Working Paper Series, Federal Reserve Bank of Boston

Files in This Item:
File Description SizeFormat
680150110.pdf443.6 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/55580

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.