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Estimating the Relationship between Skill and Overconfidence

Jan Feld (), Jan Sauermann () and Andries de Grip ()

No 627, Working Papers in Economics from University of Gothenburg, Department of Economics

Abstract: The Dunning–Kruger effect states that the low skilled are overconfident while the high skilled are more accurate in assessing their skill. In apparent support of this effect, many studies have shown that low performers overestimate their performance while high performers are more accurate. This empirical pattern, however, might be a statistical artifact caused by measurement error. We are the first paper to consistently estimate the Dunning–Kruger effect using an instrumental variable approach. In the context of exam grade predictions of economics students, we use students’ grade point average as an instrument for their skill. Our results support the existence of the Dunning–Kruger effect.

Keywords: Overconfidence; judgment error; measurement error; instrumental variable (search for similar items in EconPapers)
JEL-codes: D03 I23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe
Date: 2015-09
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Published as Feld, Jan, Jan Sauermann and Andries De Grip, 'Estimating the Relationship between Skill and Overconfidence' in Journal of Behavioural and Experimental Economics, 2017, pages 18-24.

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http://hdl.handle.net/2077/40536 (text/html)

Related works:
Journal Article: Estimating the relationship between skill and overconfidence (2017) Downloads
Working Paper: Estimating the Relationship between Skill and Overconfidence (2017) Downloads
Working Paper: Estimating the Relationship between Skill and Overconfidence (2017) Downloads
Working Paper: Estimating the relationship between skill and overconfidence (2017) Downloads
Working Paper: Estimating the relationship between skill and overconfidence (2017) Downloads
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