Managing Self-Confidence: Theory and Experimental Evidence

Markus M. Möbius (), Muriel Niederle (), Paul Niehaus () and Tanya Rosenblat
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Markus M. Möbius: Microsoft Research New England, Cambridge, Massachusetts 02142; University of Michigan, Ann Arbor, Michigan 48109; National Bureau of Economic Research, Cambridge, Massachusetts 02138
Muriel Niederle: National Bureau of Economic Research, Cambridge, Massachusetts 02138; Stanford University, Stanford, California 94305
Paul Niehaus: National Bureau of Economic Research, Cambridge, Massachusetts 02138; University of California San Diego, La Jolla, California 92093

Management Science, 2022, vol. 68, issue 11, 7793-7817

Abstract: We use a series of experiments to understand whether and how people’s beliefs about their own abilities are biased relative to the Bayesian benchmark and how these beliefs then affect behavior. We find that subjects systematically and substantially overweight positive feedback relative to negative (asymmetry) and also update too little overall (conservatism). These biases are substantially less pronounced in an ego-free control experiment. Updating does retain enough of the structure of Bayes’ rule to let us model it coherently in an optimizing framework, in which, interestingly, asymmetry and conservatism emerge as complementary biases. We also find that exogenous changes in beliefs affect subjects’ decisions to enter into a competition and do so similarly for more and less biased subjects, suggesting that people cannot “undo” their biases when the time comes to decide.

Keywords: asymmetric belief updating; conservatism; information aversion; overconfidence (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (57)

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http://dx.doi.org/10.1287/mnsc.2021.4294 (application/pdf)

Related works:
Working Paper: Managing self-confidence: theory and experimental evidence (2011)
Working Paper: Managing Self-Confidence: Theory and Experimental Evidence (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:68:y:2022:i:11:p:7793-7817

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