This paper studies, theoretically and empirically, the role of overconfidence in political behavior. Our model of overconfidence in beliefs predicts that overconfidence leads to ideological extremeness, increased voter turnout, and stronger partisan identification. The model also makes nuanced predictions about the patterns of ideology in society. These predictions are tested using unique data that measure the overconfidence and standard political characteristics of a nationwide sample of over 3,000 adults. Our numerous predictions find strong support in these data. In particular, we document that overconfidence is a substantively and statistically important predictor of ideological extremeness, voter turnout, and partisan identification.

Many violations of the Independence axiom of Expected Utility can be traced to subjects' attraction to risk-free prospects.Negative Certainty Independence, the key axiom in this paper, formalizes this tendency.Our main result is a utility representation of all preferences over monetary lotteries that satisfy Negative Certainty Independence together with basic rationality postulates.Such preferences can be represented as if the agent were unsure of how risk averse to be when evaluating a lottery p; instead, she has in mind a set of possible utility functions over outcomes and displays a cautious behavior: she computes the certainty equivalent of p with respect to each possible function in the set and picks the smallest one.The set of utilities is unique in a well-defined sense.We show that our representation can also be derived from a 'cautious' completion of an incomplete preference relation.

This paper develops axiomatically a revealed preference theory of reference-dependent choice behavior. Instead of taking the reference for an agent as exogenously given in the description of a choice problem, we suitably relax the Weak Axiom of Revealed Preference to obtain, endogenously, the existence of reference alternatives as well as the structure of choice behavior conditional on those alternatives. We show how this model captures some well-known choice patterns such as the attraction effect.