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I Prefer Not to Know! Analyzing the Decision of Getting Information about your Ability

Paulina Andrea Granados Zambrano

No ECO2012/04, Economics Working Papers from European University Institute

Abstract: The recognition that information is, most of the time, incomplete and imperfect is essential in understanding the nature of the formation of beliefs. To understand human behavior in the area of (academic) performance, the beliefs individuals sustain about their ability become crucial. Before performing a certain task, the agent never knows his/her true ability. He/she only has an ex-ante notion of his/her believed ability and the truth is only revealed ex-post. Once the true ability is known and the payoffs realized, we observe different reactions that range from disappointment to happiness. The logical question is then, who would have preferred not to know the truth? This paper deals with the information acquisition decisions of individuals who face uncertainty about their own ability. At a theoretical level (Bénabou and Tirole, 2002), it has been shown that overconfident individuals (people with beliefs about themselves higher than reality) with time inconsistent preferences have more at stake when they face the decision of learning the truth about themselves than more pessimistic agents. To test this prediction, a field experiment is designed and implemented, where students face the decision of learning, or not, their true ability before performing a test. It will be shown that overconfident students indeed more often decide not to learn their true ability.

Keywords: overconfidence; beliefs; ability; information acquisition; field experiment (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-cbe, nep-cta, nep-exp, nep-hpe and nep-upt
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