Optimism without Illusion: The Impact of Experience on Expectations

15 Pages Posted: 19 Nov 2008

See all articles by Ron Kaniel

Ron Kaniel

University of Rochester - Simon Business School; CEPR

Cade Massey

University of Pennsylvania - The Wharton School

David T. Robinson

Fuqua School of Business, Duke University; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

Date Written: November 10, 2008

Abstract

Whether judgment and decision making biases improve with experience remains an important and contentious question. Positive illusions, for example, have been documented extensively, but virtually always in single-shot settings. To what extent do these illusions persist over time? And what factors influence their persistence? We suggest that dispositional optimism plays an important but surprising role. Building on the link between optimism and positive coping, we suggest that, given experience, dispositional optimists have fewer positive illusions than pessimists. We test this hypothesis in a longitudinal study of graduate students. Initially we find that optimists' expectations about their grades are more positively biased than pessimists'. However, the impact of experience is quite different for optimists than pessimists-optimists' positive illusions decline over time while pessimists' increase. Consequently, by year's end the pattern is fully reversed: optimists have fewer positive illusions than do pessimists.

Suggested Citation

Kaniel, Ron and Massey, Cade and Robinson, David T., Optimism without Illusion: The Impact of Experience on Expectations (November 10, 2008). Yale SOM Working Paper No. 1302924. Available at SSRN: https://ssrn.com/abstract=1302924 or http://dx.doi.org/10.2139/ssrn.1302924

Ron Kaniel

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

HOME PAGE: http://rkaniel.simon.rochester.edu

CEPR ( email )

London
United Kingdom

Cade Massey (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

David T. Robinson

Fuqua School of Business, Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0120
United States
919-660-8023 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

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