Overconfidence, underconfidence, and welfare

Takao Asano; Takuma Kunieda; Akihisa Shibata

doi:10.1628/093245615X14273596659161

Overconfidence, underconfidence, and welfare

Takao Asano, Takuma Kunieda, Akihisa Shibata

Research output: Contribution to journal › Article › peer-review

Abstract

Using a simple framework due to Cooper and John (1988) and Cooper (1999), this paper derives the conditions under which overconfidence and underconfidence of agents lead to Pareto improvement. We show that an agent’s overconfidence in a game exhibiting strategic complementarity and positive spillovers and an agent’s underconfidence in a game exhibiting strategiccomplementarity and negative spillovers can lead to Pareto improvement.

Original language	English
Pages (from-to)	372-384
Number of pages	13
Journal	Journal of Institutional and Theoretical Economics
Volume	171
Issue number	2
DOIs	https://doi.org/10.1628/093245615X14273596659161
Publication status	Published - Jun 2015

ASJC Scopus subject areas

Economics and Econometrics

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10.1628/093245615X14273596659161

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title = "Overconfidence, underconfidence, and welfare",

abstract = "Using a simple framework due to Cooper and John (1988) and Cooper (1999), this paper derives the conditions under which overconfidence and underconfidence of agents lead to Pareto improvement. We show that an agent{\textquoteright}s overconfidence in a game exhibiting strategic complementarity and positive spillovers and an agent{\textquoteright}s underconfidence in a game exhibiting strategiccomplementarity and negative spillovers can lead to Pareto improvement.",

author = "Takao Asano and Takuma Kunieda and Akihisa Shibata",

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year = "2015",

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Overconfidence, underconfidence, and welfare

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