@techreport{00f43201caf34ee0be171784b2634749,
title = "Mispricing Through Misconfidence",
abstract = "This paper investigates the impact of misconfidence on price stickiness in markets characterized by strategic complementarities. Misconfidence denotes the tendency of cognitively able individuals to underestimate the cognitive ability of others. In an experiment, we first measure cognitive ability and misconfidence, and then have participants make price choices in a market. We find that prices in markets with at least one misconfident participant deviate significantly more from equilibrium levels than in markets composed exclusively of confident, cognitively able agents. Importantly, misconfident individuals are no more prone to self-assessment errors than others, indicating that misconfidence constitutes a distinct cognitive bias—fundamentally different from conventional forms of overconfidence or underconfidence.",
keywords = "Price stickiness, strategic complementarity, controlled experiments, beliefs",
author = "Niccol{\`o} Zaccaria and Sigrid Suetens and Burak Uras",
note = "CentER Discussion Paper Nr. 2025-016",
year = "2025",
month = dec,
day = "8",
language = "English",
volume = "2025-016",
series = "CentER Discussion Paper",
publisher = "CentER, Center for Economic Research",
pages = "1--48",
type = "WorkingPaper",
institution = "CentER, Center for Economic Research",
}