Hope Over Experience: Desirability and the Persistence of Optimism

Abstract

Many important decisions hinge on expectations of future outcomes. Decisions about health, investments, and relationships all depend on predictions of the future. These expectations are often optimistic: People frequently believe that their preferred outcomes are more likely than is merited. Yet it is unclear whether optimism persists with experience and, surprisingly, whether it is truly caused by desire. These are important questions because life’s most consequential decisions often feature both strong preferences and the opportunity to learn. We investigated these questions by collecting football predictions from National Football League fans during each week of the 2008 season. Despite accuracy incentives and extensive feedback, predictions about preferred teams remained optimistically biased through the entire season. Optimism was as strong after 4 months as it was after 4 weeks. We exploit variation in preferences and matchups to show that desirability fueled this optimistic bias.

Keywords: Judgment, Learning, Prediction, Preferences, Optimism

JEL Classification: D83, D84