Robert Bloomfield

Contagion of Wishful Thinking in Markets

Coauthor(s): Nicholas Seybert.

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Abstract:
Prior research provides only weak and controversial evidence that people overestimate the likelihood of desirable events (wishful thinking), but strong evidence that people bet more heavily on those events (wishful betting). Two experiments show that wishful betting contaminates beliefs in laboratory financial markets because wishful betters appear to possess more favorable information than they actually do. As a consequence, market interaction exacerbates rather than mitigates wishful thinking. This phenomenon, "contagion of wishful thinking," could be problematic in many settings where people infer others? beliefs from their behavior.

Source: Management Science
Exact Citation:
Bloomfield, Robert, and Nicholas Seybert. "Contagion of Wishful Thinking in Markets." Management Science 55, no. 5 (May 2009): 738-751.
Volume: 55
Number: 5
Pages: 738-751
Date: 5 2009