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Optimism and Overconfidence in Search

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  • Juan Dubra

    (Universidad de Montevideo)

Abstract

In a standard search model I relax the assumption that agents know the distribution of offers and characterize the behavioral and welfare consequences of overconfidence. Optimistic individuals search longer than pessimists if they are equally "stubborn" and high offers are good news. Otherwise, the pessimists search longer. The welfare of unbiased individuals is larger than that of overconfident decision makers if the latter's biases are large and searchers stubborn. Otherwise, the overconfident may be better off. Finally, I give a testable implication of overconfidence and discuss some applications and policy issues. (Copyright: Elsevier)

Suggested Citation

  • Juan Dubra, 2004. "Optimism and Overconfidence in Search," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 198-218, January.
    • Handle: RePEc:red:issued:v:7:y:2004:i:1:p:198-218
    DOI: 10.1016/S1094-2025(03)00036-X
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    References listed on IDEAS

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