Sytematically Skewed Beliefs

39 Pages Posted: 27 Nov 2020

Date Written: September 7, 2020

Abstract

We have a tendency to overestimate the commonness of our own preferences. This paper investigates if this overestimation is limited to our beliefs about a single statistic (such as the median or mean), or if it extends to our beliefs about an entire distribution. In a laboratory experiment, I elicit subjects’ beliefs about the distribution of other people’s types, and check if subjects systematically skew their beliefs in relation to their own types. Experiment results strongly suggest that they do. In particular, all subjects overestimate the density around their own types. Using experimental data to estimate PDFs of actual and predicted distributions, I show that predicted distributions can be presented as skewed transformations of the actual distribution, where the size and direction of skewness is determined by a subject’s own type.

Keywords: beliefs, distributions, cognitive bias, overestimation

JEL Classification: C9, D8

Suggested Citation

Samad, Zeeshan, Sytematically Skewed Beliefs (September 7, 2020). Available at SSRN: https://ssrn.com/abstract=3709455 or http://dx.doi.org/10.2139/ssrn.3709455

Zeeshan Samad (Contact Author)

Vanderbilt University ( email )

Box 1819 Station B
Nashville, TN 37235
United States

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