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Cover of: Overconfidence, Underconfidence, and Welfare
Takao Asano, Takuma Kunieda, Akihisa Shibata

Overconfidence, Underconfidence, and Welfare

Section: Articles
Volume 171 (2015) / Issue 2, pp. 372-384 (13)
Published 09.07.2018
DOI 10.1628/093245615X14273596659161
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Summary
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 strategic complementarity and negative spillovers can lead to Pareto improvement.