Deception and Self-Deception
39 Pages Posted: 19 Feb 2016 Last revised: 30 Apr 2018
Date Written: February 19, 2016
Why are people so often overconfident? We conduct an experiment to test the hypothesis that people become overconfident to more effectively persuade or deceive others. After performing a cognitively challenging task, half of our subjects are informed that they can earn money by convincing others of their superior performance. The privately elicited beliefs of informed subjects display significantly more overconfidence than the beliefs of subjects in the control condition. Generating exogenous variation in confidence with a noisy performance signal, we also show that higher confidence indeed makes subjects more persuasive in the subsequent face-to-face interactions.
Keywords: overconfidence, belief formation, self-deception, deception
JEL Classification: C91, D03, D83
Suggested Citation: Suggested Citation