Economics Cognitive Biases Questions
The illusion of skill refers to the tendency of individuals to overestimate their own abilities and expertise in a particular domain. In the context of economic decision-making, this bias can lead individuals to believe that they possess superior skills or knowledge in predicting market trends, investing, or making financial decisions. As a result, they may engage in excessive trading, take on unnecessary risks, or make poor investment choices based on their inflated confidence. This bias can have detrimental effects on economic decision-making, leading to financial losses and suboptimal outcomes.