Working Paper: NBER ID: w30262
Authors: Benjamin Enke; Thomas Graeber; Ryan Oprea
Abstract: The influence of behavioral biases on aggregate outcomes like prices and allocations depends in part on self-selection: whether rational people opt more strongly into aggregate interactions than biased individuals. We conduct a series of betting market, auction and committee experiments using 15 classic cognitive bias tasks. We document that some cognitive errors are strongly reduced through self-selection, while others are not affected at all. A large part of this variation is explained by the quality of people's meta-cognition. In some cognitive tasks, confidence and performance are strongly positively correlated, while for others this link is absent or even negative.
Keywords: No keywords provided
JEL Codes: D01; D03
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| self-selection in social institutions (D71) | filtering effect on cognitive biases (D91) |
| filtering effect on cognitive biases (D91) | less biased aggregate outcomes (D79) |
| strong confidence in decisions (D80) | effective filtering of biases (D91) |
| poorly calibrated confidence (D80) | persistence or amplification of biases (D91) |
| self-selection in social institutions (D71) | less biased aggregate outcomes (D79) |
| relative confidence calibration (C51) | degree of filtering (C29) |
| cognitive errors (D91) | aggregate outcomes (E10) |
| metacognition (D83) | understanding cognitive errors and aggregate outcomes (D91) |