Extant evidence that the self-employed overestimate their returns by more than employees do is consistent with two mutually inclusive possibilities. Self-employment may generate optimism or optimists may be drawn to self-employment. This paper finds that employees who will be self-employed in...

This paper considers the estimation of sequential schooling decisions made by agents who are endowed with subjective beliefs about their own ability. I use unique Italian panel data which provide information on i) the curvature of the per-period utility function, ii) schooling decisions, iii)...

Recent research in economics suggests a positive association between self-esteem and earnings. A major problem in this literature is that from simple cross-sectional wage regressions it is not possible to conclude that self-esteem has a causal impact on earnings. While classical measurement...

A long-standing puzzle is how overconfidence can persist in settings characterized by repeated feedback. This paper studies managers who participate repeatedly in a high-powered tournament incentive system, learning relative performance each time. Using reduced form and structural methods we...

We examine the influence of guilt and trust on the performance of credence goods markets. An expert can make a promise to a consumer first, whereupon the consumer can express her trust by paying an interaction price before the expert’s provision and charging decisions. We argue that the...

Beliefs are a central determinant of behavior. Recent models assume that beliefs about or the anticipation of future consumption have direct utility-consequences. This gives rise to informational preferences, i.e., preferences over the timing and structure of information. Using a novel and...

Research has shown that procrastination has signicant adverse effects on individuals, including lower savings and poorer health. Procrastination is typically modeled as resulting from present bias. In this paper we study an alternative: excessively optimistic beliefs about future demands on an...

Using British panel data, we explore the finding that households often expect theirÂ…financial position to remain unchanged compared to other alternatives, using a generalised middle inflated ordered probit (GMIOP) model. In doing so we account for the tendency of individuals to choose...

Economic research on entertainment is scant despite its large share of time use. We test economic theories of belief-based utility in the context of video-game engagement. Using data on 2.8 million matches from League of Legends, we find evidence supporting reference-dependent preferences, loss...

We implement a survey-based randomized information treatment that generates independent variation in the inflation expectations and the uncertainty about future inflation of European households. This variation allows us to assess how both first and second moments of inflation expectations...