Unpacking Overconfident Behavior When Betting on Oneself

Mohammed Abdellaoui, Han Bleichrodt and Cédric Gutierrez
Additional contact information
Mohammed Abdellaoui: HEC Paris
Han Bleichrodt: Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Australian National University (ANU) - School of Economics
Cédric Gutierrez: Bocconi University - Department of Management and Technology

No 1484, HEC Research Papers Series from HEC Paris

Abstract: Overconfident behavior, the excessive willingness to bet on one’s performance, may be driven by optimistic beliefs and/or ambiguity attitudes. Separating these factors is key for understanding and correcting overconfident behavior, as they may call for different corrective actions. We present a method to do so, which we implement in two incentivized experiments. The first experiment shows the importance of ambiguity attitudes for overconfident behavior. Optimistic ambiguity attitudes (ambiguity seeking) counterbalanced the effect of pessimistic beliefs, leading to neither over- nor underconfident behavior. The second experiment applies our method in contexts where overconfident behavior is expected to vary: easy vs. hard tasks. Our results showed that task difficulty affected both beliefs and ambiguity attitudes. However, while beliefs were more optimistic for relative performance (rank) and more pessimistic for absolute performance (score) on easy tasks compared to hard tasks, ambiguity attitudes were always more optimistic on easy tasks for both absolute and relative performance. Our findings show the subtle interplay between beliefs and ambiguity attitudes: they can reinforce or offset each other, depending on the context, increasing or lowering overconfident behavior.

Keywords: overconfidence; subjective expected utility; beliefs measurement; ambiguity attitudes; hard-easy effect. (search for similar items in EconPapers)
JEL-codes: D81 D83 D91 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2023-05-23
New Economics Papers: this item is included in nep-cbe, nep-dcm, nep-exp, nep-neu and nep-upt
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4441080 Full text (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1484

DOI: 10.2139/ssrn.4441080

Access Statistics for this paper

More papers in HEC Research Papers Series from HEC Paris HEC Paris, 78351 Jouy-en-Josas cedex, France. Contact information at EDIRC.
Bibliographic data for series maintained by Antoine Haldemann ().