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- Title
Persistent Overconfidence and Biased Memory: Evidence from Managers.
- Authors
HUFFMAN, DAVID; RAYMOND, COLLIN; SHVETS, JULIA
- Abstract
A long-standing puzzle is how overconfidence can persist in settings characterized by repeated feedback. This paper studies managers who participate repeatedly in a high-powered tournament incentive system, learning relative performance each time. Using reduced form and structural methods we find that (i) managers make overconfident predictions about future performance; (ii) managers have overly positive memories of past performance; (iii) the two phenomena are linked at an individual level. Our results are consistent with models of motivated beliefs in which individuals are motivated to distort memories of feedback and preserve unrealistic expectations.
- Subjects
MEMORY; TOURNAMENTS; EXPECTATION (Psychology); PUZZLES; MOTIVATION (Psychology); PSYCHOLOGICAL feedback; METACOGNITION
- Publication
American Economic Review, 2022, Vol 112, Issue 10, p3141
- ISSN
0002-8282
- Publication type
Article
- DOI
10.1257/aer.20190668