Séminaire

Overconfidence and Prejudice

Paul Heidhues (Dusseldorf Institute for Competition Economics)

10 décembre 2019, 11h00–12h30

Toulouse

Salle Auditorium 2

Economic Theory Seminar

Résumé

Injecting a single non-classical assumption, that the agent is overconfident about himself, into a bare-bones model of observations about society, we explain key observed patterns in social beliefs, and make a number of additional predictions. First, the agent has self-centered views about discrimination: he believes in discrimination against any group he is in more than an outsider does. Second, the agent is subject to in-group bias: the more group memberships he shares with an individual, the more positively he evaluates the individual. Third, these biases are increasing in the agent’s overconfidence. Fourth, the biases are sensitive to how he divides society into groups when evaluating outcomes. Fifth, giving the agent more accurate information about himself increases all his biases. Sixth, the agent is prone to bias substitution, implying that the introduction of a new outsider group creates prejudice against the new group but lowers prejudices against other groups. Seventh, the agent tends to agree more with those in the same groups.

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