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Are We All Better Drivers than Average? Self-Perception and Biased Behaviour

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  • Carrillo, Juan
  • Brocas, Isabelle

Abstract

This Paper studies a model where individuals have imperfect self-knowledge and learning is costly. It shows that the endogenous decision to collect information before taking an action creates a systematic and testable bias in the aggregate behaviour of agents in the economy. More precisely, individuals distort the information acquisition procedure so as to favour the possibility of undertaking the action that generates the highest benefits in some states, even if it also generates the biggest losses in some others. The Paper thus explains within a rational framework why 80% of individuals may perceive themselves as being brighter, better drivers and more able entrepreneurs than their average peer. Applications to biases in career choices and judicial decisions are discussed.

Suggested Citation

  • Carrillo, Juan & Brocas, Isabelle, 2002. "Are We All Better Drivers than Average? Self-Perception and Biased Behaviour," CEPR Discussion Papers 3603, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:3603
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    References listed on IDEAS

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    1. Michael Manove & A. Jorge Padilla, 1999. "Banking (Conservatively) with Optimists," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 324-350, Summer.
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    3. Matthew Rabin., 1995. "Moral Preferences, Moral Constraints, and Self-Serving Biases," Economics Working Papers 95-241, University of California at Berkeley.
    4. Andrew Caplin & John Leahy, 2004. "The supply of information by a concerned expert," Economic Journal, Royal Economic Society, vol. 114(497), pages 487-505, July.
    5. Manove, M., 1995. "Entrepreneurs, Optimism, and the Competitive Edge," UFAE and IAE Working Papers 296.95, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    6. Juan D. Carrillo & Thomas Mariotti, 2000. "Strategic Ignorance as a Self-Disciplining Device," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(3), pages 529-544.
    7. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    8. Andrew Caplin & John Leahy, 2001. "Psychological Expected Utility Theory and Anticipatory Feelings," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(1), pages 55-79.
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    Citations

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    Cited by:

    1. Eric Van den Steen, 2004. "Rational Overoptimism (and Other Biases)," American Economic Review, American Economic Association, vol. 94(4), pages 1141-1151, September.
    2. Silvia Dominguez-Martinez & OttoH. Swank, 2009. "A Simple Model of Self-Assessment," Economic Journal, Royal Economic Society, vol. 119(539), pages 1225-1241, July.
    3. Merkle, Christoph & Weber, Martin, 2011. "True overconfidence: The inability of rational information processing to account for apparent overconfidence," Organizational Behavior and Human Decision Processes, Elsevier, vol. 116(2), pages 262-271.

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    More about this item

    Keywords

    Self-perception; Bias in judgement; Decision-making;
    All these keywords.

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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