A target-based foundation for the "hard-easy effect" bias

Robert Bordley (), Marco LiCalzi and Luisa Tibiletti ()
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Robert Bordley: Dept. of Industrial Engineering and Operations Management, University of Michigan, USA

No 23, Working Papers from Venice School of Management - Department of Management, Università Ca' Foscari Venezia

Abstract: The "hard-easy effect" is a well-known cognitive bias on self-confidence calibration that refers to a tendency to overestimate the probability of success in hard-perceived tasks, and to underestimate it in easy-perceived tasks. This paper provides a target-based foundation for this effect, and predicts its occurrence in the expected utility framework when utility functions are S-shaped and asymmetrically tailed. First, we introduce a definition of hard-perceived and easy-perceived task based on the mismatch between an uncertain target to meet and a suitably symmetric reference point. Second, switching from a target-based language to a utility-based language, we show how this maps to an equivalence between the hard-perceived target/gain seeking and the easy-perceived target/loss aversion. Third, we characterize the agent's miscalibration in self-confidence. Finally, we derive sufficient conditions for the Òhard-easy effectÓ and the "reversed hard-easy effect" to hold.

Keywords: Expected utility; Hard-easy effect bias; Endowment effect bias; Sunk cost effect bias; Benchmarking procedure; Loss-gain asymmetry; van Zwet skewness conditions (search for similar items in EconPapers)
JEL-codes: C91 D81 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2014-10
New Economics Papers: this item is included in nep-cbe, nep-mic and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Chapter: A Target-Based Foundation for the “Hard-Easy Effect” Bias (2017)
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