Using a simple framework due to Cooper and John (1988) and Cooper (1999), this paper derives the conditions under which overconfidence and underconfidence of agents lead to Pareto improvement. We show that an agent’s overconfidence in a game exhibiting strategic complementarity and positive spillovers and an agent’s underconfidence in a game exhibiting strategiccomplementarity and negative spillovers can lead to Pareto improvement.
|Number of pages||13|
|Journal||Journal of Institutional and Theoretical Economics|
|Publication status||Published - Jun 1 2015|
ASJC Scopus subject areas
- Economics and Econometrics