Astri Muren: Dept. of Economics, Stockholm University, Postal: Department of Economics, Stockholm University, S-106 91 Stockholm, Sweden
Abstract: An experiment is designed to test if individuals show (unrealistic) optimism when determining their subjective probabilities about exogenous circumstances. Subjects in the control group make an informed guess about a number, under a payment scheme that rewards close guesses. In the treatment group, subjects' payments depend on the actual number as well as on the closeness of the guess, and they are thus given an incentive to guess optimistically. The data suggests that there is an optimistic bias.
20 pages, March 22, 2004
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