Overconfident Consumers in the Marketplace
Bibliographic Data
| ID | 4030288 |
|---|---|
| Authors | Michael D Grubb (0000-0001-9885-2225, Michael D. Grubb is Assistant Professor of Economics, Boston College, Chestnut Hill, Massachusetts. His email address is, corresponding author) |
| Year | 2015 |
| Volume | 29 |
| Issue | 4 |
| Pages | 9-36 |
| Publication date | 2015-11-01 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | The Journal of Economic Perspectives (JOURNAL) |
| Journal identifiers | ISSN: 0895-3309 • E-ISSN: 1944-7965 |
| Publisher | American Economic Association (PUBLISHER • US) |
| DOI | 10.1257/jep.29.4.9 |
| OpenAlex | W2192676305 |
| Language | EN |
| Citations received | 13 |
| References cited | 54 |
The term overconfidence is used broadly in the psychology literature, referring to both overoptimism and overprecision. Overoptimistic individuals overestimate their own abilities or prospects. In contrast, overprecise individuals place overly narrow confidence intervals around forecasts, thereby underestimating uncertainty. These biases can lead consumers to misforecast their future product usage, or to overestimate their abilities to navigate contract terms. In consequence, consumer overconfidence causes consumers to systematically misweight different dimensions of product quality and price. Poor choices based on biased estimates of a product's expected costs or benefits are the result. For instance, overoptimism about self-control is a leading explanation for why individuals overpay for gym memberships that they underutilize. Similarly, overprecision is a leading explanation for why individuals systematically choose the wrong calling plans, racking up large overage charges for exceeding usage allowances in the process. Beyond these market effects of overconfidence, this paper addresses three additional questions: What will firms do to exploit consumer overconfidence? What are the equilibrium welfare consequences of consumer overconfidence for consumers, firms, and society? And what are the implications of consumer overconfidence for public policy
Actuarial science · Behavioral economics · Business · Consumer confidence index · Economics · Incentive · Microeconomics · Overconfidence effect · Product market · Decision-Making and Behavioral Economics · Economic and Environmental Valuation · Financial Literacy, Pension, Retirement Analysis · Psychology · Social Psychology · Marketing
The Magic of the Game
Exposure to Covid-19 and travel intentions
Testing for overconfidence statistically
The Dynamics of Exploiting Overconfident Workers
Consumer-generated reviews
Financing affordable and sustainable homeownership with Fixed-Cofi mortgages
Does the visual salience of credit card features affect choice
FinTech, terrorism-related fund transfers and behavioural finance
Overconfidence in the art market
Beyond information
Overconfidence and preferences for gun use
The Questionable Value of Having a Choice of Levels of Health Insurance Coverage
Focal points for giving
Are we all less risky and more skillful than our fellow drivers?
Self-Confidence and Personal Motivation
Calibration of probabilities
Reasons for confidence.
Projection Bias in Predicting Future Utility
Doing It Now or Later
Paying Not to Go to the Gym
Beyond Revealed Preference
How are preferences revealed?
Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets
Judgment under Uncertainty
Salience and Taxation
Confidence-Enhanced Performance
Pass-Through as an Economic Tool
A Note on the Effect of Cost Changes on Prices
Unskilled and unaware of it
Theoretical Economics
Unrealistic optimism about future life events
Illusion and well-being
| Unique citing works | 13 |
|---|---|
| Citations per year | 1,44 |
| Citation span | 2017 - 2025 (9) |
| Citation velocity | recent |
| Highly cited | No |
| Citation types | Neutral: 13 |