The virtue of overconfidence when you are not perfectly informed

Deqing Zhou

Economic Modelling, 2015, vol. 47, issue C, 105-110

Abstract: Based on Foster and Viswanathan (1994), this work investigates how the heterogeneous beliefs affect equilibrium results when agents are informed asymmetrically. We find that the equilibrium remains the same whether or not the better informed agent is overconfident, but it is a virtue for the less informed agent to be overconfident since this helps him survive in competing with the other less informed agents, however, the less informed agents cannot earn more than the better informed agent, no matter how overconfident he is.

Keywords: Asymmetrically informed traders; Overconfidence (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:47:y:2015:i:c:p:105-110

DOI: 10.1016/j.econmod.2015.02.010

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