Summer Research Projects

Overconfidence effect
Kirsten Cornelson

"Research in behavioural economics has shown that people tend to overestimate their own abilities and chances of success. This overconfidence effect is one of several biases, or heuristics, that systematically influence the way people make decisions. These biases can have important economic effects. For example, it has been suggested that overconfidence contributes to the high failure rates of new businesses by leading entrepreneurs to underestimate the risks associated with new ventures. This summer, I am attempting to explain why overconfidence might be beneficial when considered in conjunction with several other biases. I hope to build a model of overconfidence that incorporates recent work on time inconsistency and willpower, as well as older research on the misuse of historical analogy. In doing so, I hope to tie together some diverse elements of a large literature on cognitive biases in decision-making."

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