True overconfidence, revealed through actions: An experiment

Stephen Cheung and Lachlan Johnstone
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Lachlan Johnstone: The University of Sydney

Journal of Risk and Uncertainty, 2025, vol. 70, issue 2, No 5, 199 pages

Abstract: Abstract We design an experiment to infer true overconfidence in relative ability through actions, as opposed to reported beliefs. Subjects choose how to invest earnings from a skill task where the returns depend either solely upon risk, or both risk and relative placement, enabling joint estimation of individual risk preferences and implied subjective beliefs of placing in the top half. We find evidence of aggregate overconfidence only in a treatment that receives minimal feedback on performance in a trial round. In treatments that receive more detailed feedback aggregate overconfidence is not observed, however identifiable segments of over- and underconfident individuals persist.

Keywords: True overconfidence; Overplacement; Subjective beliefs; Joint estimation (search for similar items in EconPapers)
JEL-codes: C91 D03 D81 D83 (search for similar items in EconPapers)
Date: 2025
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Working Paper: True Overconfidence, Revealed through Actions: An Experiment (2017)
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DOI: 10.1007/s11166-025-09452-y

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