Contagion of Wishful Thinking in Markets

Nicholas Seybert () and Robert Bloomfield ()
Additional contact information
Nicholas Seybert: McCombs School of Business, University of Texas at Austin, Austin, Texas 78712
Robert Bloomfield: Johnson Graduate School of Management, Cornell University, Ithaca, New York 14853

Management Science, 2009, vol. 55, issue 5, 738-751

Abstract: Prior research provides only weak and controversial evidence that people overestimate the likelihood of desirable events (wishful thinking), but strong evidence that people bet more heavily on those events (wishful betting). Two experiments show that wishful betting contaminates beliefs in laboratory financial markets because wishful betters appear to possess more favorable information than they actually do. As a consequence, market interaction exacerbates rather than mitigates wishful thinking. This phenomenon, "contagion of wishful thinking," could be problematic in many settings where people infer others' beliefs from their behavior.

Keywords: wishful thinking; betting; desirability bias; unrealistic optimism; motivated reasoning; contagion; markets; investors; investing; gambling; information aggregation (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.1080.0973 (application/pdf)

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:inm:ormnsc:v:55:y:2009:i:5:p:738-751

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().