Document Type : Research Paper

Authors

1 Master of Economics, Department of Economics, Faculty of Literature and Humanities, Ilam University, Ilam, Iran

2 Associate Professor of Economics, Department of Economics, Faculty of Literature and Humanities, Ilam University, Ilam, Iran

Abstract

The main goal of this article is an applied investigation of one of the types of biases caused by overconfidence, under the heading of bias in expected relative wage (or individual overplacement) and its relationship with time preferences (in the form of a proxy of people's patience) based on the Friehe & Pannenberg (2020) method. The data gathering tool of this investigation has been a two-stage questionnaire. 204 staff and faculty members of Ilam university completed the questions related to the questionnaire in two stages. Based on the ordinary least squares and semi-parametric model, the relationship between bias in wage and time preferences was examined in four stages. The results of research models in four stages showed that there is a negative and significant correlation between bias in expected relative wage (or bias in the distribution of the relative wage of people of the same age-peers) and time preferences. This means that people who are more patient, will have less bias (overplacement) on average. Examining the impact of current relative wage on bias showed that there is a positive and significant correlation between bias and current relative wage; This means that the current relative wage of individuals is not effective in reducing bias, and the higher the individual's current relative wage, the individual's bias will be greater. Also, the results showed that there is a positive and significant correlation between bias and extraversion, a negative and significant correlation between bias and neuroticism and a negative and significant correlation between bias and agreeableness.

Keywords

Main Subjects

Almeida, A. I. O. (2019). Motivated beliefs in collective decisions. Dissertation, Masters in Economics, Universitat de Barcelona, Faculty of Economics and Business, 1-50.
Bénabou, R., & Tirole, J. (2002). Self-confidence and personal motivation. The quarterly journal of economics, 117(3), 871-915.
Bénabou, R., & Tirole, J. (2016). Mindful economics: The production, consumption, and value of beliefs. Journal of Economic Perspectives30(3), 141-64.
Briel, S., Osikominu, A., Pfeifer, G., Reutter, M., & Satlukal, S. (2020). Overconfidence and gender differences in wage expectations. IZA DP No. 10545. 1-47.
Chavoshi, K,. Rastegar, M,. & Mirzaee, M. (2015). Examination of the relation between managerial overconfidence and financing policies in Tehran stock exchange. Financial Knowledge of Securities Analysis (Financial Studies).8(25). 29-41. [In Persian]
Dohmen, T., Falk, A., Golsteyn, B. H., Huffman, D., & Sunde, U. (2017). Risk Attitudes Across The Life Course. Economic Journal, 127(605), 95-116.
Dohmen, T., Falk, A., Huffman, D., Sunde, U., Schupp, J., & Wagner, G. G. (2011). Individual risk attitudes: Measurement, determinants, and behavioral consequences. Journal of the european economic association9(3), 522-550.
Epley, N., & Gilovich, T. (2016). The mechanics of motivated reasoning. Journal of Economic perspectives30(3), 133-40.
Federici, R. A. (2013). Principals’ self-efficacy: Relations with job autonomy, job satisfaction, and contextual constraints. European journal of psychology of education28(1), 73-86.
Feld, J., Sauermann, J., & De Grip, A. (2017). Estimating the relationship between skill and overconfidence. Journal of behavioral and experimental economics, 68, 18-24.
Foroghi,.D &  Moazeni,.N.(2017). The Effect of CEO overconfidence on firm value. Journal of Financial Accounting Knowledge.4(15). 65-84. [In Persian]
França, H. T. (2018). Motivated Beliefs: Strategic Ignorance and Selective Memory in Investment. Dissertation, Masters in Economics, Universitat de Barcelona, Faculty of Economics and Business, 1-57.
Friehe, T., & Pannenberg, M. (2019). Overconfidence over the lifespan: Evidence from Germany. Journal of Economic Psychology74, 102207.
Friehe, T., & Pannenberg, M. (2020). Time preferences and overconfident beliefs: Evidence from Germany. Journal of Behavioral and Experimental Economics92, 1-36. https://doi.org/10.1016/j.socec.2020.101651
George, E. (2013). A study on the effect of psychological empowerment on job satisfaction and job related stress among the bank employees. Doctor of Philosophy, Cochin University of Science and Technology, School of Management Studies,1-257.
Gholipour,. Z, Marashi,. S. A,. Mehrabizadeh Honarmand, M,. Arshadi,. N. (2016). Resilience as a mediator between big five-factor personality trait and happiness. Educational Psychology.12(39). 135-155. [In Persian]
Heger, S. A., & Papageorge, N. W. (2018). We should totally open a restaurant: How optimism and overconfidence affect beliefs. Journal of Economic Psychology67, 177-190.
Jahankhani, A., Nouferesti, M., & Gharahgouzlou F. (2009). Overconfidence and trading volume in Tehran market exchange. Journal of Business Management Perspective (Management Perspective). 8(30). 105-123. [In Persian]
Khoshtinat, M,. & Nadi Gbomi V. (2009). The Framework of relation of investors overconfidence behavior with stock return. Empirical Studies in Financial Accounting.7 (25).53-85. [In Persian]
Logg, J. M., Haran, U., & Moore, D. A. (2018). Is overconfidence a motivated bias? Experimental evidence. Journal of Experimental Psychology: General, 147(10), 1445.
Magnus, J. R., & Peresetsky, A. A. (2018). Grade expectations: Rationality and overconfidence. Frontiers in psychology, 8, 2346.
Mele, A. R. (1998). Motivated belief and agency. Philosophical Psychology11(3), 353-369.
Michailova, J. (2010). Development of the overconfidence measurement instrument for the economic experiment .Munich Personal RePEc Archive, University Library of Munich, Germany.
Moore, D. A., & Healy, P. J. (2008). The trouble with overconfidence. Psychological review115(2), 502.
Moore, D. A., & Schatz, D. (2017). The three faces of overconfidence. Social and Personality Psychology Compass11(8), e12331.
Moore, D. A., & Swift, S. A. (2011). The three faces of overconfidence in organizations. In D. De Cremer, R. van Dick, & J. K. Murnighan (Eds.), Social psychology and organizations (pp. 147–184). Routledge/Taylor & Francis Group.
Murad, Z., Sefton, M., & Starmer, C. (2016). How do risk attitudes affect measured confidence?. Journal of Risk and Uncertainty52(1), 21-46.
Oster, E., Shoulson, I., and E.R. Dorsey, 2013. Optimal expectations and limited medical testing: Evidence from Huntington disease. American Economic Review, 103, 804-830.
Park, Y. J., & Santos-Pinto, L. (2010). Overconfidence in tournaments: Evidence from the field. Theory and Decision69(1), 143-166.
Ramezan Ahmadi M.,. Ghalambor M. H,. & Dorseh S.S. (2019). Impact ceo overconfidence measures on  future stock price crashes of  listed companies in tehran stock exchange. The financial Accounting and Auduting  Researches.11(41). 93-124.[In Persian]
Ring, P., Neyse, L., David-Barett, T., & Schmidt, U. (2016). Gender differences in performance predictions: Evidence from the cognitive reflection test. Frontiers in psychology, 7, 1680.
Santos-Pinto, L., & de la Rosa, L. E. (2020). Overconfidence in labor markets. Handbook of Labor, Human Resources and Population Economics, 1-42.
Schaefer, P. S., Williams, C. C., Goodie, A. S., & Campbell, W. K. (2004). Overconfidence and the big five. Journal of research in Personality, 38(5), 473-480.
Sharot, T., & Garrett, N. (2016). Forming beliefs: Why valence matters. Trends in cognitive sciences20(1), 25-33.
Soleimany Amiri,.G & Gerveie,. P. (2017). The impact of managerial overconfidence on systematic and unsystematic risk. Journal of Accounting Advances.9(1). 99-124. [In Persian]
Teimouri, E,. Renani, M,. & Moarefi Mohammadi, A. (2017). A critique of rational choice from the viewpoint of competing approaches: behavioral and experimental economics and brain sciences. Iranian Journal of Economic Research. 22(73). 1-43. [In Persian]
Verardi, V., & Debarsy, N. (2012). Robinson's square root of N consistent semiparametric regression estimator in Stata. The Stata Journal, 12(4), 726-735.
Wilson, Anastasia C. (2020). Behavioral Economics In Context: Applications for Development, Inequality & Discrimination, Finance, and Environment. An ECI Teaching Module on Social and Economic Issues, Economics in Context Initiative, Global Development Policy Center, Boston University, 2020. 1-46. https://www.bu.edu/eci/files/2020/05/Behavioral-Economics_final.pdf. UK Biobank online resource centre. https:// biobank.ndph.ox.ac.uk