Forgetting We Forget: Overconfidence and Memory

Journal of the European Economic Association, Forthcoming

21 Pages Posted: 18 Mar 2009 Last revised: 14 Dec 2009

Keith M. Marzilli Ericson

Boston University - Markets, Public Policy, and Law; National Bureau of Economic Research (NBER)

Date Written: February 26, 2009

Abstract

Do individuals have unbiased beliefs, or are they over- or underconfident? Overconfident individuals may fail to prepare optimally for the future, and economists who infer preferences from behavior under the assumption of unbiased beliefs will make mistaken inferences. This paper documents overconfidence in a new domain, prospective memory, using an experimental design that is more robust to potential confounds than previous research. Subjects chose between smaller automatic payments and larger payments they had to remember to claim at a six-month delay. In a large sample of college and MBA students at two different universities, subjects make choices that imply a forecast of a 76% claim rate, but only 53% of subjects actually claimed the payment.

Keywords: overconfidence, memory, prospective memory, beliefs

JEL Classification: C91, D81, D83, D84

Suggested Citation

Ericson, Keith M. Marzilli, Forgetting We Forget: Overconfidence and Memory (February 26, 2009). Journal of the European Economic Association, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1347043 or http://dx.doi.org/10.2139/ssrn.1347043

Keith M. Marzilli Ericson (Contact Author)

Boston University - Markets, Public Policy, and Law ( email )

Boston, MA
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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