Discussion Paper Details

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Title: Are We All Better Drivers than Average? Self-Perception and Biased Behaviour

Author(s): Isabelle Brocas and Juan D Carrillo

Publication Date: October 2002

Keyword(s): bias in judgement, decision-making and self-perception

Programme Area(s): Industrial Organization and Public Economics

Abstract: This Paper studies a model where individuals have imperfect self-knowledge and learning is costly. It shows that the endogenous decision to collect information before taking an action creates a systematic and testable bias in the aggregate behaviour of agents in the economy. More precisely, individuals distort the information acquisition procedure so as to favour the possibility of undertaking the action that generates the highest benefits in some states, even if it also generates the biggest losses in some others. The Paper thus explains within a rational framework why 80% of individuals may perceive themselves as being brighter, better drivers and more able entrepreneurs than their average peer. Applications to biases in career choices and judicial decisions are discussed.

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Bibliographic Reference

Brocas, I and Carrillo, J. 2002. 'Are We All Better Drivers than Average? Self-Perception and Biased Behaviour'. London, Centre for Economic Policy Research.