Overconfidence, Underconfidence, and Welfare
Takao Asano (),
Takuma Kunieda () and
Akihisa Shibata ()
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Takao Asano: Okayama University
No 903, KIER Working Papers from Kyoto University, Institute of Economic Research
Using a simple framework of Cooper and John (1988) and Cooper (1999), this paper derives the conditions under which overconfidence and underconfidence of agents lead to Pareto improvement. We show that an agent’s overconfidence in a game exhibiting strategic complementarity and positive spillovers and an agent’s underconfidence in a game exhibiting strategic complementarity and negative spillovers can lead to Pareto improvement.
Keywords: overconfidence; underconfidence; strategic complementarity; strategic substitutability; positive spillover; negative spillover (search for similar items in EconPapers)
JEL-codes: D62 C72 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-gth, nep-hpe and nep-mic
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Journal Article: Overconfidence, Underconfidence, and Welfare (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:kyo:wpaper:903
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