Managing Self-Confidence: Theory and Experimental Evidence
55 Pages Posted: 9 May 2011 Last revised: 28 Jun 2024
There are 2 versions of this paper
Managing Self-Confidence: Theory and Experimental Evidence
Date Written: May 2011
Abstract
Evidence from social psychology suggests that agents process information about their own ability in a biased manner. This evidence has motivated exciting research in behavioral economics, but has also garnered critics who point out that it is potentially consistent with standard Bayesian updating. We implement a direct experimental test. We study a large sample of 656 undergraduate students, tracking the evolution of their beliefs about their own relative performance on an IQ test as they receive noisy feedback from a known data-generating process. Our design lets us repeatedly measure the complete relevant belief distribution incentive-compatibly. We find that subjects (1) place approximately full weight on their priors, but (2) are asymmetric, over-weighting positive feedback relative to negative, and (3) conservative, updating too little in response to both positive and negative signals. These biases are substantially less pronounced in a placebo experiment where ego is not at stake. We also find that (4) a substantial portion of subjects are averse to receiving information about their ability, and that (5) less confident subjects are causally more likely to be averse. We unify these phenomena by showing that they all arise naturally in a simple model of optimally biased Bayesian information processing.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Social Comparison and Confidence: When Thinking You're Better than Average Predicts Overconfidence
-
Self Confidence: Intrapersonal Strategies
By Roland Bénabou and Jean Tirole
-
Betting on Own Knowledge: Experimental Test of Overconfidence
-
Overconfidence is a Social Signaling Bias
By Stephen V. Burks, Jeffrey P. Carpenter, ...
-
Paying for Confidence: An Experimental Study of the Demand for Non-Instrumental Information
By Kfir Eliaz and Andrew Schotter
-
Managing Self-Confidence: Theory and Experimental Evidence
By Markus M. Mobius, Muriel Niederle, ...