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Apparent Overconfidence
Author(s) -
Benoît JeanPierre,
Dubra Juan
Publication year - 2011
Publication title -
econometrica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 16.7
H-Index - 199
eISSN - 1468-0262
pISSN - 0012-9682
DOI - 10.3982/ecta8583
Subject(s) - overconfidence effect , econometrics , rank (graph theory) , simple (philosophy) , bayesian probability , psychology , economics , mathematical economics , statistics , mathematics , social psychology , epistemology , philosophy , combinatorics
It is common for a majority of people to rank themselves as better than average on simple tasks and worse than average on difficult tasks. The literature takes for granted that this apparent misconfidence is problematic. We argue, however, that this behavior is consistent with purely rational Bayesian updaters. In fact, better‐than‐average data alone cannot be used to show overconfidence; we indicate which type of data can be used. Our theory is consistent with empirical patterns found in the literature.