Credibility of Self-Evaluation

1. Before a transaction takes place, people make a predictive evaluation by estimating how it would impact on them.
2. The transaction then happens.
3. Afterwards, the parties involved have a better idea of how it affected their welfare, so they make a post-hoc evaluation that reflects this increased understanding.

To see how past history influences credibility, suppose that 3 people, , & have predicted how much a transaction would benefit them. Now suppose you can only help one of them. Which one do you choose?     (To help you, you can look at the pale icons and arrows, which show their previous transactions). Blue has made the highest prediction of the transaction's worth. However, examination of his previous transactions shows that they were all huge over-evaluations. He has undermined his own credibility. Green has not made such a high prediction of the transaction's value, but has established credibility by consistently making post-hoc evaluations that match his predictions. Orange may be the most appealing of the three, although his prediction is the lowest, because of his track record. He has a habit of predictions that under-estimate his post-hoc evaluations.