Testing for overconfidence statistically: A moment inequality approach

Summary We propose a moment inequality approach to test for the presence of overconfidence using data from ranking experiments where subjects rank themselves relative to other experimental participants. Although a ranking experiment is a typical way to collect data for the analysis of overconfidence...

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Bibliographic Details
Published in:Journal of applied econometrics (Chichester, England) England), 2020-11, Vol.35 (7), p.879-892
Main Authors: Jin, Yanchun, Okui, Ryo
Format: Article
Language:English
Subjects:
Bayesian analysis
Business & Economics
Data collection
Econometrics
Economics and Business
Ekonomi och näringsliv
Inequalities
Inequality
Mathematical Methods In Social Sciences
Ranking
Ratings & rankings
selection
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Summary:Summary We propose a moment inequality approach to test for the presence of overconfidence using data from ranking experiments where subjects rank themselves relative to other experimental participants. Although a ranking experiment is a typical way to collect data for the analysis of overconfidence, recent studies show that the resulting data may apparently indicate overconfidence even if participants are purely rational Bayesian updaters, in which case a set of inequalities hold. We apply state‐of‐the‐art tests of moment inequalities to test such a set of inequalities. We examine the data from a traditional ranking experiment as well as those from more sophisticated designs.
ISSN:0883-7252
1099-1255
DOI:10.1002/jae.2780