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on Cognitive and Behavioural Economics |
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Issue of 2024‒11‒04
three papers chosen by Marco Novarese, Università degli Studi del Piemonte Orientale |
| By: | Bachler, Sebastian; Haeussler, Stefan; Momsen, Katharina; Stefan, Matthias |
| JEL: | D83 D91 C44 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc24:302404 |
| By: | Jeanne Hagenbach (CNRS and Department of Economics, Sciences Po); Nicolas Jacquemet (Centre d'Economie de la Sorbonne, Université Paris 1 Panthéon-Sorbonne, Paris School of Economics); Philipp Sternal (University of Zurich, Department of Economics) |
| Abstract: | We propose a two-stage experiment in which people receive feedback about their relative intelligence. This feedback is a noisy message reminded at every stage, so that subjects cannot forget this ego-relevant information. Instead, we exogenously vary whether the informativeness of the message is reminded in the second stage. We investigate how this treatment variation affects the informativeness reported by subjects, and their posterior beliefs about their intelligence. We show that subjects report informativeness in a self-serving way: subjects with negative messages report that these messages are significantly less informative in the absence of reminder than with it. We also show that the lack of reminder about message informativeness allows subjects to keep a better image of themselves. These results are confirmed by complementary treatments in which we decrease messages informativeness: subjects tend to inflate the informativeness of positive messages that should now be interpreted as bad news |
| Keywords: | Controlled experiment; Motivated beliefs; Overconfidence; Noisy feedback |
| JEL: | C91 D83 D63 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:mse:cesdoc:24010 |
| By: | Ciril Bosch-Rosa; Bernhard Kassner; Steffen Ahrens |
| Abstract: | We study the relationship between overconfidence and the political and financial behavior of a nationally representative sample. Consistent with theoretical predictions, our findings indicate that excessive confidence in one's judgment is associated with lower portfolio diversification, greater stock price forecasting errors, and more extreme political views. We also find that overconfidence correlates with an increased likelihood of voting absenteeism. Importantly, our analysis bridges the gap between the financial and political literature by showing that overprecision-induced behavior in the financial domain is associated with overprecise behavior in the political domain, and vice versa. In a companion survey that elicits overconfidence across various knowledge domains, we further show that overconfidence is consistent within respondents and across knowledge domains. All of these findings suggest that overconfidence is a pervasive bias that permeates many aspects of people's lives. |
| Keywords: | Overconfidence, SOEP, Survey |
| JEL: | C83 D91 G41 |
| Date: | 2024–10–02 |
| URL: | https://d.repec.org/n?u=RePEc:bdp:dpaper:0051 |