Optimal overconfidence in the presence of information manipulation

Wang Bo and Zheng Suli

Economics Letters, 2023, vol. 231, issue C

Abstract: This paper studies overconfidence in a decision-making model with an information manipulation stage. We demonstrate overconfidence discourages information manipulation and thereby improves allocation efficiency. The ideal level of overconfidence compromises between this discouragement effect and the information loss brought on by non-Bayesian weight. Overconfident leadership benefits the organisation and this conclusion is robust to a more general setting of information manipulation. Results of comparative static analysis are reported.

Keywords: Information manipulation; Overconfidence; Decision-making (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:231:y:2023:i:c:s0165176523003051

DOI: 10.1016/j.econlet.2023.111280

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