Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/235345 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 8975
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
Beliefs about collective outcomes, such as economic growth or firm profitability, play an important role in many contexts. We study biases in the formation of such beliefs. Specifically, we explore whether over-optimism and self-serving biases in information processing—documented for beliefs about individual outcomes—affect beliefs about collective outcomes. We find that people indeed exhibit self-serving biases for collective outcomes, and that such biases are similar to biases for individual outcomes. In addition, we investigate whether collective self-delusion is mitigated by market institutions. If anything, biases in information processing are more pronounced in the presence of a market.
Subjects: 
beliefs
Bayes’ rule
asymmetric updating
overconfidence
motivated reasoning
JEL: 
I18
C93
Z13
Document Type: 
Working Paper
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