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The overconfidence effect is a well-established bias in which a person's subjective confidence in their judgments is reliably greater than the objective accuracy of those judgments, especially when confidence is relatively high. [1] [2] Overconfidence is one example of a miscalibration of subjective probabilities.
The framing effect is the tendency to draw different conclusions from the same information, depending on how that information is presented. Forms of the framing effect include: Contrast effect, the enhancement or reduction of a certain stimulus's perception when compared with a recently observed, contrasting object. [57]
Some researchers include a metacognitive component in their definition. In this view, the Dunning–Kruger effect is the thesis that those who are incompetent in a given area tend to be ignorant of their incompetence, i.e., they lack the metacognitive ability to become aware of their incompetence.
Has been shown to affect various important economic decisions, for example, a choice of car insurance or electrical service. [32] Overconfidence effect: Tendency to overly trust one's own capability to make correct decisions. People tended to overrate their abilities and skills as decision makers. [33] See also the Dunning–Kruger effect.
In an article in the American Economic Review, Odean explained that: "The more overconfident an investor, the more he trades and the lower his expected utility. ... Overconfident investors ...
Overconfidence is a very serious problem, but you probably think it doesn't affect you. That's the tricky thing with overconfidence: The people who are most overconfident are the ones least likely ...
It seems that even chief justices are affected by overconfidence. Palaima is Armstrong Professor of Classics at the University of Texas and a fellow of the American Academy of Arts and Sciences.
Behavioral economics is the study of the psychological (e.g. cognitive, behavioral, affective, social) factors involved in the decisions of individuals or institutions, and how these decisions deviate from those implied by traditional economic theory. [1] [2] Behavioral economics is primarily concerned with the bounds of rationality of economic ...