Overweighting Private Information: Three Measures, One Bias?

Overweighting private information is often used to explain various detrimental decisions. In behavioral economics and finance, it is usually modeled as a direct consequence of misperceiving signal reliability. This bias is typically dubbed overconfidence and linked to the judgment literature in psychology. Empirical tests of the models often fail to find evidence for the predicted effects of overconfidence. These studies assume, however, that a specific type of overconfidence, i.e., "miscalibration," captures the underlying trait. We challenge this assumption and borrow the psychological methodology of single-cue probability learning to obtain a direct measure for overweighting private information. We find that overweighting private information and measures of "miscalibration" are unrelated, indicating that different kinds of misperceptions are at work. Thus, in order to test the theoretical predictions of the overconfidence literature in economics and finance, one cannot rely on the well-established "miscalibration" bias. We find no gender differences in overconfidence for our measures except for one, where women are more overconfident than men.overconfidence, miscalibration, signal perception, cognitive bias

Choices with Delayed Consequences: Pleasing or Fighting Future Tastes?

Many choices concern consumption in future periods. If preferences are state-dependent, a fundamental question is whether people consider their preferences at the time of consumption or decision as more important. Assuming the first, previous studies apparently demonstrate that people systematically mispredict their future tastes. Most of this evidence, however, is also consistent with the idea that people understand, but do not approve of their future preferences. To disentangle both approaches, we conducted a framed field experiment with a commitment option. Commitment in our experiment was not a device against weak will. It was a judgment, which one planning self imposed on another planning self. The results suggest that people are not willing to neglect their preferences at the time of the decision. People may sometimes experience a con ict between two far-sighted selves. This has profound implications in the area of consumer sovereignty and questions the main justification of paternalism

"Do We Follow Others when We Should? A Simple Test of Rational Expectations": Comment

Weizsäcker (2010) estimates the payoff of actions to test rational expectations and to measure the success of social learning in information cascade experiments. He concludes that participants perform poorly when learning from others and that rational expectations are violated. We show that his estimated payoffs rely on estimates of the publicly known prior and signal qualities which may lead the formulated test of rational expectations to generate false positives. We rely on the true values of the prior and signal qualities to estimate the payoff of actions. We confirm that the rational expectations hypothesis is rejected, but we measure a much larger success of social learning.Information Cascades, Laboratory Experiments, Quantal Response Equilibrium

Do We Follow Private Information when We Should? Laboratory Evidence on Naive Herding

We investigate whether experimental participants follow their private information and contradict herds in situations where it is empirically optimal to do so. We consider two sequences of players, an observed and an unobserved sequence. Observed players sequentially predict which of two options has been randomly chosen with the help of a medium quality private signal. Unobserved players predict which of the two options has been randomly chosen knowing previous choices of observed and with the help of a low, medium or high quality signal. We use preprogrammed computers as observed players in half the experimental sessions. Our new evidence suggests that participants are prone to a 'social-confirmation' bias and it gives support to the argument that they naively believe that each observable choice reveals a substantial amount of that person's private information. Though both the 'overweighting-of-private-information' and the 'social-con firmation' bias coexist in our data, participants forgo much larger parts of earnings when herding naively than when relying too much on their private information. Unobserved participants make the empirically optimal choice in 77 and 84 percent of the cases in the human-human and computer-human treatment which suggests that social learning improves in the presence of lower behavioral uncertainty

Do We Follow Private Information when We Should? Laboratory Evidence on Naive Herding

We investigate whether experimental participants follow their private information and contradict herds in situations where it is empirically optimal to do so. We consider two sequences of players, an observed and an unobserved sequence. Observed players sequentially predict which of two options has been randomly chosen with the help of a medium quality private signal. Unobserved players predict which of the two options has been randomly chosen knowing previous choices of observed and with the help of a low, medium or high quality signal. We use preprogrammed computers as observed players in half the experimental sessions. Our new evidence suggests that participants are prone to a 'social-confirmation' bias and it gives support to the argument that they naively believe that each observable choice reveals a substantial amount of that person's private information. Though both the 'overweighting-of-private-information' and the 'social-con firmation' bias coexist in our data, participants forgo much larger parts of earnings when herding naively than when relying too much on their private information. Unobserved participants make the empirically optimal choice in 77 and 84 percent of the cases in the human-human and computer-human treatment which suggests that social learning improves in the presence of lower behavioral uncertainty.Information cascades ; Laboratory Experiments ; Naive herding

Erreichbarkeits- und Analyseinstrumente für die Daseinsvorsorgeplanung: Potenziale und Hindernisse

Systeme zur Entscheidungsunterstützung haben große Potenziale, Planungsprozesse im Rahmen der Daseinsvorsorge zu verbessern. Allerdings werden mit zunehmenden technischen Möglichkeiten Fragen nach verbesserter Anwendungsorientierung und Nutzbarkeit für Akteure der Planung deutlich. In einem Workshop haben Akteure aus Planungspraxis, Wissenschaft und Wirtschaft anhand von konkreten Fragen aus der Planung die Anwendung der web-basierten Tools „Daseinsvorsorgeatlas Niedersachsen“ und „GOAT 3.0“ diskutiert. Im Rahmen von Arbeitsgruppen wurden die Anwendbarkeit, Indikatoren und Modellierungen sowie Hindernisse für eine Integration in Verfahren erarbeitet

The risk ethics of autonomous vehicles: a continuous trolley problem in regular road traffic

Is the ethics of autonomous vehicles (AVs) restricted to weighing lives in unavoidable accidents? We argue that AVs distribute risks between road users in regular traffic situations, either explicitly or implicitly. This distribution of risks raises ethically relevant questions that cannot be evaded by simple heuristics such as "hitting the brakes." Using an interactive, graphical representation of different traffic situations, we measured participants' preferences on driving maneuvers of AVs in a representative survey in Germany. Our participants' preferences deviated significantly from mere collision avoidance. Interestingly, our participants were willing to take risks themselves for the benefit of other road users suggesting that the social dilemma of AVs may lessen in a context of risk