We study an experimentation problem in a situation where the outcomes depend on the decision-maker's intrinsic ability and on an external variable. We analyze the mistakes made by individuals who hold inaccurate prior beliefs about their ability. Overconfident individuals take too much credit for their successes and excessively blame external factors if they fail. They are too easily dissatisfied with their environment, which leads them to experiment in variable environments and revise their self-confidence over time. In contrast, underconfident individuals might be trapped in low-quality environments and incur perpetual utility losses.
Hestermann, Nina, and Yves Le Yaouanq.
"Experimentation with Self-Serving Attribution Biases."
American Economic Journal: Microeconomics,
Consumer Economics: Theory
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making