Bayesian Overconfidence
Paul J. Healy
Don A. Moore
10.1184/R1/6704108.v1
https://kilthub.cmu.edu/articles/journal_contribution/Bayesian_Overconfidence/6704108
We study three distinct measures of overconfidence: (1) overestimation of
one's performance, (2) overplacement of one's performance relative to others,
and (3) overprecision in one's belief about private signals. A new set of experiments verifies a strong negative link between overestimation and overprecision
that depends crucially on task difficulty (the `hard-easy' effect). We present
a simple Bayesian model in which agents are uncertain about the underlying
task difficulty. This model correctly predicts the observed regularities. Thus,
we capture several observed patterns of overconfidence without assuming any
implicit behavioral biases.
1998-08-01 00:00:00
Business
Management