Gilles Hilary, Charles Hsu, Benjamin Segal, Rencheng Wang
Human estimation and inference are subject to systematic biases such as overconfidence and over-optimism. In contrast to prior research that has identified multiple negative consequences of these biases, we focus on positive effects. We empirically examine a setting in which over-optimism a) is a related but different bias from overconfidence, b) emerges dynamically in a rational economic framework, and c) generates higher managerial effort. Importantly, this additional effort improves firm profitability and market value. © 2016 Elsevier B.V.
INSEAD, 1 Ayer Rajah Avenue, 138676, Singapore; HKUST, Hong Kong; Fordham University, United States; Hebrew University, Israel; University of Queensland, Australia
