An unlucky feeling: Overconfidence and noisy feedback

Zachary Grossman and David Owens ()

Journal of Economic Behavior & Organization, 2012, vol. 84, issue 2, 510-524

Abstract: How do individuals’ beliefs respond to ego-relevant information? After receiving noisy, but unbiased performance feedback, participants in an experiment overestimate their own scores on a quiz and believe their feedback to be ‘unlucky’, estimating that it under-represents their score by 13%. However, they exhibit no such overconfidence in non-ego-relevant beliefs—in this case, estimates of others’ scores. Comparing subjects’ belief-updating to the Bayesian benchmark, we find that this ‘unlucky feeling’ is largely due to overconfident priors, with biased updating driving overconfidence only among the participants with the worst-calibrated beliefs. This suggests that social comparisons contribute to the biased response to feedback on relative performance observed in other studies. While feedback improves performance estimates, this learning does not translate into improved estimates of subsequent performances. This suggests that beliefs about ability are updated differently than beliefs about a particular performance, contributing to the persistence of overconfidence.

Keywords: Overconfidence; Feedback; Overestimation; Absolute performance; Bayesian updating; Biased updating; Information processing; Learning transfer; Cross-game learning (search for similar items in EconPapers)
JEL-codes: C91 D03 D83 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (107)

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Working Paper: An Unlucky Feeling: Overconfidence and Noisy Feedback (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:84:y:2012:i:2:p:510-524

DOI: 10.1016/j.jebo.2012.08.006

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