infonet-economy

This paper presents a new incentive compatible method for measuring confidence in own know-ledge. This method consists of two parts. First, an individual answers several general knowledge questions. Second, the individual chooses among three alternatives: (1) one question is selected at random and the individual receives a payoff if he or she has answered this question correctly; (2) the individual receives the same payoff with a probability equal to the percentage of correctly answered questions; (3) either the first or the second alternative is selected. The choice of the first (second) alternative reveals overconfidence (underconfidence). The individual is well calibra-ted if he or she chooses the third alternative. Experimental results show that subjects, on avera-ge, exhibit underconfidence about their own knowledge when the incentive compatible mecha-nism is used. Their confidence in own knowledge does not depend on their attitude towards risk/ambiguity.