published in: Pacific Economic Review, 2009, 14(4), 502-515
People use information about their ability to choose tasks. If more challenging tasks provide more accurate information about ability, people who care about and who are risk averse over their perception of their own ability will choose tasks that are not sufficiently challenging. Overestimation of ability raises utility by deluding people into believing that they are more able than they are in fact. Moderate overestimation of ability and overestimation of the precision of initial information leads people to choose tasks that raise expected output, however extreme overconfidence leads people to undertake tasks that are excessively challenging. Consistent with our results, psychologists have found that moderate overconfidence is both pervasive and advantageous and that people maintain such beliefs by underweighting new information about their ability.
We use cookies to provide you with an optimal website experience. This includes cookies that are necessary for the operation of the site as well as cookies that are only used for anonymous statistical purposes, for comfort settings or to display personalized content. You can decide for yourself which categories you want to allow. Please note that based on your settings, you may not be able to use all of the site's functions.
Cookie settings
These necessary cookies are required to activate the core functionality of the website. An opt-out from these technologies is not available.
In order to further improve our offer and our website, we collect anonymous data for statistics and analyses. With the help of these cookies we can, for example, determine the number of visitors and the effect of certain pages on our website and optimize our content.