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A Model of Reference-Dependent Belief Updating

Maier, Johannes; König, Clemens - 2016

We propose a model of instrumental belief choice under loss aversion. When new information arrives, an agent is prompted to abandon her prior. However, potential posteriors may induce her to take actions that generate a lower utility in some states than actions induced by her prior. These losses...

Persistent link: https://www.econbiz.de/10011584855

Optimal illusions and decisions under risk

Gollier, Christian - 2005

We examine a static one-risk-free-one-risky asset portfolio choice when the investor's wellbeing is affected by the anticipatory feelings associated to potential capital gains and losses. These feelings can be manipulated by the choice of subjective beliefs on the distribution of returns....

Persistent link: https://www.econbiz.de/10010261126

How do judgmental overconfidence and overoptimism shape innovative activity?

Herz, Holger; Schunk, Daniel; Zehnder, Christian - 2013

Recent field evidence suggests a positive link between overconfidence and innovative activities. In this paper we argue … that the connection between overconfidence and innovation is more complex than the previous literature suggests. In … particular, we show theoretically and experimentally that different forms of overconfidence may have opposing effects on …

Persistent link: https://www.econbiz.de/10010291552

Self-Confidence and Strategic Behavior

Charness, Gary; Rustichini, Aldo; van de Ven, Jeroen - 2013

salient perturbations, we propose a strategic foundation of overconfidence. Since overconfident statements are used in …

Persistent link: https://www.econbiz.de/10010328716

Overconfidence in a career-concerns setting

De La Rosa, Leonidas Enrique - 2008

We study the effects of overconfidence in a two-period investment-decision agency setting. Under common priors, agent … from first-period investment. This implies that agent overconfidence mitigates the agency problems arising from the agent …

Persistent link: https://www.econbiz.de/10010276369

It's not my Fault! Self-Confidence and Experimentation

Hestermann, Nina; Le Yaouanq, Yves - 2019

We study the inference and experimentation problem of an agent in a situation where the outcomes depend on the individual’s intrinsic ability and on an external variable. We analyze the mistakes made by decision-makers who hold inaccurate prior beliefs about their ability. Overconfident...

Persistent link: https://www.econbiz.de/10012018192

Illusion of Expertise in Portfolio Decisions - An Experimental Approach

Fellner, Gerlinde; Güth, Werner; Maciejovsky, Boris - 2001

Overall, 72 subjects invest their endowment in four risky assets. Each com-bination of assets yields the same expected return and variance of returns. Illusion of expertise prevails when one prefers nevertheless the self-selected portfolio. After being randomly assigned to groups of four...

Persistent link: https://www.econbiz.de/10010315373

Disagreement and Optimal Security Design

Ortner, Juan M.; Schmalz, Martin C. - 2018

We study optimal security design when the issuer and market participants agree to disagree about the characteristics of the asset to be securitized. We show that pooling assets can be optimal because it mitigates the effects of disagreement between issuer and investors, whereas tranching a...

Persistent link: https://www.econbiz.de/10011815799

Taxing Mobile and Overconfident Top Earners

Haufler, Andreas; Nishimura, Yukihiro - 2020

are not. In this setting we show that overconfidence (i) unambiguously increases the bonus component in the managers … overconfidence can contribute to explaining both the increasing role of bonus contracts and the fall in marginal tax rates for high …

Persistent link: https://www.econbiz.de/10012314837

Self-Serving Biases in Beliefs about Collective Outcomes

Kogan, Shimon; Schneider, Florian H.; Weber, Roberto A. - 2021

Beliefs about collective outcomes, such as economic growth or firm profitability, play an important role in many contexts. We study biases in the formation of such beliefs. Specifically, we explore whether over-optimism and self-serving biases in information processing—documented for beliefs...

Persistent link: https://www.econbiz.de/10012582038