Confidence, Self-Selection, and Bias in the Aggregate
American Economic Review
vol. 113,
no. 7, July 2023
(pp. 1933-66)
Abstract
The influence of behavioral biases on aggregate outcomes depends in part on self-selection: whether rational people opt more strongly into aggregate interactions than biased individuals. In betting market, auction and committee experiments, we document that some errors are strongly reduced through self-selection, while others are not affected at all or even amplified. A large part of this variation is explained by differences in the relationship between confidence and performance. In some tasks, they are positively correlated, such that self-selection attenuates errors. In other tasks, rational and biased people are equally confident, such that self-selection has no effects on aggregate quantities.Citation
Enke, Benjamin, Thomas Graeber, and Ryan Oprea. 2023. "Confidence, Self-Selection, and Bias in the Aggregate." American Economic Review, 113 (7): 1933-66. DOI: 10.1257/aer.20220915Additional Materials
JEL Classification
- C91 Design of Experiments: Laboratory, Individual
- D44 Auctions
- D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making