True Overconfidence, Revealed through Actions: An Experiment

Stephen Cheung and Lachlan Johnstone
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Lachlan Johnstone: University of Sydney

No 10545, IZA Discussion Papers from IZA Network @ LISER

Abstract: We report an experiment that infers true overconfidence in relative ability through actions, as opposed to reported beliefs. Subjects choose how to invest earnings from a skill task when the returns depend 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 task. In treatments that receive more detailed feedback, aggregate overconfidence is not observed although identifiable segments of overand 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)
Pages: 47 pages
Date: 2017-02
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Journal Article: True overconfidence, revealed through actions: An experiment (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp10545

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