Sabourian, H. and Sibert, Anne (2009) Banker compensation and confirmation bias. Discussion Paper. Centre for Economic Policy Research, London, UK.
Abstract
Confirmation bias refers to cognitive errors that bias one towards one's own prior beliefs. A vast empirical literature documents its existence and psychologists identify it as one of the most problematic aspects of human reasoning. In this paper, we present three related scenarios where rational behaviour leads to outcomes that are observationally equivalent to different types of conformation bias. As an application, the model provides an explanation for how the reward structure in the financial services industry led to the seemingly irrational behaviour of bankers and other employees of financial institutions prior to the financial crisis of that erupted in the summer of 2007.
Metadata
| Item Type: | Monograph (Discussion Paper) |
|---|---|
| Additional Information: | Discussion paper 7263 |
| Keyword(s) / Subject(s): | belief persistence, confirmation bias, financial crisis, overconfidence, signalling |
| School: | Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School |
| Depositing User: | Administrator |
| Date Deposited: | 03 Jun 2013 07:20 |
| Last Modified: | 02 Aug 2023 17:04 |
| URI: | https://eprints.bbk.ac.uk/id/eprint/7175 |
Statistics
Additional statistics are available via IRStats2.
Archive Staff Only (login required)
