Is Optimism Real?

Abstract

Is optimism real, or are optimistic forecasts just cheap talk? To help answer this question, we investigated whether optimistic predictions persist in the face of large incentives to be accurate. We asked National Football League football fans to predict the winner of a single game. Roughly half (the partisans) predicted a game involving their favorite team and the other half (the neutrals) predicted a game involving two teams they were neutral about. Participants were promised either a small incentive ($5) or a large incentive ($50) for correctly predicting the game’s winner. Optimism emerged even when incentives were large, as partisans were much more likely than neutrals to predict partisans’ favorite teams to win. Strong optimism also emerged among participants whose responses to follow-up questions strongly suggested that they believed the predictions they made. This research supports the claim that optimism is real.

Keywords: Biases, Decision Making, Motivated Reasoning, Incentives