Forgetting We Forget: Overconfidence and Memory
Journal of the European Economic Association, Forthcoming
21 Pages Posted: 18 Mar 2009 Last revised: 14 Dec 2009
Date Written: February 26, 2009
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: Suggested Citation