Affiliation:
1. Harvard University, Department of Economics, and NBER (email: )
2. Harvard Business School (email: )
3. UC Santa Barbara, Department of Economics (email: )
Abstract
The influence of behavioral biases on aggregate outcomes depends in part on self-selection: whether rational people opt more strongly into aggregate interactions than biased individuals. In betting market, auction and committee experiments, we document that some errors are strongly reduced through self-selection, while others are not affected at all or even amplified. A large part of this variation is explained by differences in the relationship between confidence and performance. In some tasks, they are positively correlated, such that self-selection attenuates errors. In other tasks, rational and biased people are equally confident, such that self-selection has no effects on aggregate quantities. (JEL C91, D44, D91)
Publisher
American Economic Association
Subject
Economics and Econometrics
Cited by
3 articles.
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