Economics at your fingertips  

The Culture of Overconfidence

V. Bhaskar and Caroline Thomas ()

American Economic Review: Insights, 2019, vol. 1, issue 1, 95-110

Abstract: Perceptions of overconfidence can exacerbate the tendency of reputationally concerned leaders to continue bad projects. Reputation concerns alone induce a bias toward inefficient continuation in a leader receiving information privately. When she is overconfident—or holds a more favorable prior than observers—this tendency is aggravated. This remains true even when she is not really overconfident, but merely perceived to be so. Higher-order beliefs regarding overconfidence induce inefficient equilibrium selection even when there is "almost common knowledge" that the leader is not overconfident. This provides a novel perspective on how culture selects among equilibria: via higher-order beliefs.

JEL-codes: D82 D83 Z13 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/aeri.20180200
References: Add references at CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link) (application/pdf) (application/pdf) (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: The culture of overconfidence (2018) Downloads
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:

Ordering information: This journal article can be ordered from

Access Statistics for this article

American Economic Review: Insights is currently edited by Amy Finkelstein

More articles in American Economic Review: Insights from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().

Page updated 2022-05-21
Handle: RePEc:aea:aerins:v:1:y:2019:i:1:p:95-110