2012-03-28 papers

on Neuroeconomics

Issue of 2012–03–28
two papers chosen by
Daniel Houser, George Mason University

Network Cognition By Dessí, Roberta; Gallo, Edoardo; Goyal, Sanjeev
A status-enhancement account of overconfidence By Anderson, Cameron; Brion, Sebastien; Moore, Don A.; Kennedy, Jessica A.

By:	Dessí, Roberta; Gallo, Edoardo; Goyal, Sanjeev
Abstract:	We study individual ability to memorize and recall information about friendship networks using a combination of experiments and survey-based data. In the experiment subjects are shown a network, in which their location is exogenously assigned, and they are then asked questions about the network after it disappears. We find that subjects exhibit two main cognitive biases: (i) they underestimate the mean degree compared to the actual network and (ii) they underestimate (overestimate) the number of frequent (rare) degrees. We then analyze survey data from two `real' friendship networks from a Silicon Valley firm and from a University Research Center. We find, somewhat remarkably, that individuals in these real networks also exhibit these biases. The experiments yield three further findings: (iii) network cognition is affected by the subject's location, (iv) the accuracy of network cognition varies with the nature of the network, and (v) limitations in network cognition have payoff implications.
Keywords:	cognition; social networks
JEL:	Z1
Date:	2012–01
URL:	https://d.repec.org/n?u=RePEc:cpr:ceprdp:8732

A status-enhancement account of overconfidence

By:	Anderson, Cameron; Brion, Sebastien; Moore, Don A.; Kennedy, Jessica A.
Abstract:	In explaining the prevalence of the overconfident belief that one is better than others, prior work has focused on the motive to maintain high self-esteem, abetted by biases in attention, memory, and cognition.An additional possibility is that overconfidence enhances the personâ€™s social status.We tested this status-enhancing account of overconfidence in six studies. Studies 1 through 3 found overconfidence leads to higher social status in both short and longer-term groups, using naturalistic and experimental designs. Study 4 applied a Brunswikian (1956) lens analysis and found that overconfidence leads to a behavioral signature that makes the individual appear competent to others. Studies 5 and 6 measured and experimentally manipulated the desire for status and found that the status motive promotes overconfidence. Together, these studies suggest that people might so often believe they are better than others because it helps them achieve higher social status.
Keywords:	Business Administration, Management and Operations, Other
Date:	2012–03–02
URL:	https://d.repec.org/n?u=RePEc:cdl:indrel:qt6s5812wf

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