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Publicado en: Artículo en revista académica

Inducing Overconfidence

Francisco Silva.

Economic Inquiry, volume 55

In this paper, I present a theory which explains how the influence of others may generate overconfidence. The argument is built on the idea that the more help an agent receives when performing a task, the less informative the score on that task will be relative to the agent´s ability to perform it. If an agent is confident, he tends to benefit from more cooperation opportunities simply because he is likely to be perceived as being more skilled. As a result, he remains confident because the future signals he will observe will contain very little information regarding his ability. On the contrary, if the agent is not confident, he will receive more informative scores, which will help him learn his true ability faster.

JEL classification: D81, D83, D84
Keywords: Overconfidence, learning about ability, rational expectations


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