Confidence, Self-Selection, and Bias in the Aggregate
Benjamin Enke, Thomas Graeber, Ryan Oprea
American Economic Review · 2023 · Volume 113 · Issue 7
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.
Keywords
Design of Experiments: Laboratory, Individual, Auctions, Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
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