How do risk attitudes affect measured confidence?

Murad, Zahra; Sefton, Martín; Starmer, Chris

doi:10.1007/s11166-016-9231-1

Cited by 41 publications

(34 citation statements)

References 66 publications

(57 reference statements)

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“…They are nevertheless within the typically reported range (see Murad et al. 2015 ; Epper et al. 2011 for values of slightly higher than 1).…”

Section: Resultssupporting

confidence: 86%

The role of information search and its influence on risk preferences

Kopsacheilis

2017

Theory Decis

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According to the 'Description-Experience gap' (DE gap), when people are provided with the descriptions of risky prospects they make choices as if they overweight the probability of rare events; but when making decisions from experience after exploring the prospects' properties, they behave as if they underweight such probability. This study revisits this discrepancy while focusing on information-search in decisions from experience. We report findings from a lab-experiment with three treatments: a standard version of decisions from description and two versions of decisions from experience: with and without a 'history table' recording previously sampled events. We find that people sample more from lotteries with rarer events. The history table proved influential; in its absence search is more responsive to cues such as a lottery's variance while in its presence the cue that stands out is the table's maximum capacity. Our analysis of risky choices captures a significant DE gap which is mitigated by the presence of the history table. We elicit probability weighting functions at the individual level and report that subjects overweight rare events in experience but less so than in description. Finally, we report a measure that allows us to compare the type of DE gap found in studies using choice patterns with that inferred through valuation and find that the phenomenon is similar but not identical across the two methods.

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“…They are nevertheless within the typically reported range (see Murad et al. 2015 ; Epper et al. 2011 for values of slightly higher than 1).…”

Section: Resultssupporting

confidence: 86%

The role of information search and its influence on risk preferences

Kopsacheilis

2017

Theory Decis

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“… Schotter and Treviño (2014) andMurad, Sefton and Starmer (2016) highlight that the effect of the use of incentives is still an object of study in experimental economics and that more studies are needed in order to conclude that they encourage truth-telling and/or precision more than not incentivizing.Schotter and Treviño (2014) show that paying a flat-rate versus not paying at all does not seem to make a differential effect in belief elicitation. Closer to our setting, Murad, Sefton and Starmer (2016) find that non-incentivized measures reproduce 'hard-easy effect' (overconfidence in easy tasks and underconfidence in hard tasks) and that incentivized measures produce general underconfidence, which is reduced but not eliminated.…”

mentioning

confidence: 99%

What You Don’t Know…Can’t Hurt You? A Natural Field Experiment on Relative Performance Feedback in Higher Education

et al. 2019

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This paper studies the effect of providing feedback to college students on their position in the grade distribution by using a natural field experiment. This information was updated every six months during a three-year period. We find that greater grades transparency decreases educational performance, as measured by the number of exams passed and GPA. However self-reported satisfaction, as measured by surveys conducted after feedback is provided but before students take their exams, increases. We provide a theoretical framework to understand these results, focusing on the role of prior beliefs, and using out-of-trial surveys to test the model. In the absence of treatment, a majority of students underestimate their position in the grade distribution, suggesting that the updated information is "good news" for many students. Moreover, the negative effect on performance is driven by those students who underestimate their position in the absence of feedback. Students who overestimate initially their position, if anything, respond positively. The performance effects are short lived -by the time students graduate, they have similar accumulated GPA and graduation rates.

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“…In the literature of finance, over-confidence is described partly as a result of "better than average effect", where people have unrealistic views about themselves that they are better than the rest (Glaser and Weber, 2007). This is closely related to risk-attitudes when individuals tend to take more risk as a result of the confidence in their own performance, as shown by Murad et al (2016). Overconfident investors underestimate the variance of the risky assets, as shown in the over-confidence modelling of investors by Benos (1998); Kyle and Wang (1997) and Wang (2009).…”

Section: Overconfidence and Riskinessmentioning

confidence: 99%

Conned by a Cashback? Disclosure, Nudges and Consumer Rationality in Mortgage Choice

King¹,

Singh²

2020

AEA Randomized Controlled Trials

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Financial products with a cashback feature typically cost consumers more in the long run, but their popularity is rising in the mortgage and credit markets. Using a nationally representative online sample from Ireland, we find that consumers who are younger, less educated and suffer from present bias are more likely to choose costly cash back mortgages. Through a series of experiments, we provide strong evidence that advanced disclosure improves financial decision making of customers and that negative nudges, or advertising, encourages prospective buyers into more costly mortgages. We also find evidence that consumers who demonstrate limited attention bias choose more expensive cashback mortgages that are financially equivalent at the point of drawdown.

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How do risk attitudes affect measured confidence?

Cited by 41 publications

References 66 publications

The role of information search and its influence on risk preferences

The role of information search and its influence on risk preferences

What You Don’t Know…Can’t Hurt You? A Natural Field Experiment on Relative Performance Feedback in Higher Education

Conned by a Cashback? Disclosure, Nudges and Consumer Rationality in Mortgage Choice

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