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Confidence-Enhanced Performance

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Author Info

  • Olivier Compte
  • Andrew Postlewaite

Abstract

There is ample evidence that emotions affect performance. Positive emotions can improve performance, while negative ones can diminish it. For example, the fears induced by the possibility of failure or of negative evaluations have physiological consequences (shaking, loss of concentration) that may impair performance in sports, on stage, or at school. There is also ample evidence that individuals have distorted recollection of past events and distorted attributions of the causes of success or failure. Recollection of good events or successes is typically easier than recollection of bad ones or failures. Successes tend to be attributed to intrinsic aptitudes or effort, while failures are attributed to bad luck. In addition, these attributions are often reversed when judging the performance of others. The objective of this paper is to incorporate the phenomenon that emotions affect performance into an otherwise standard decision theoretic model and show that in a world where performance depends on emotions, biases in information processing enhance welfare.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/0002828043052204
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 94 (2004)
Issue (Month): 5 (December)
Pages: 1536-1557

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Handle: RePEc:aea:aecrev:v:94:y:2004:i:5:p:1536-1557

Note: DOI: 10.1257/0002828043052204
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  1. Geanakoplos, John & Pearce, David & Stacchetti, Ennio, 1989. "Psychological games and sequential rationality," Games and Economic Behavior, Elsevier, vol. 1(1), pages 60-79, March.
  2. Roland BĂ©nabou & Jean Tirole, 2002. "Self-Confidence And Personal Motivation," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 871-915, August.
  3. Matthew Rabin., 1992. "Incorporating Fairness into Game Theory and Economics," Economics Working Papers 92-199, University of California at Berkeley.
  4. Eric, Van den Steen, 2002. "Skill or Luck? Biases of Rational Agents," Working papers 4255-02, Massachusetts Institute of Technology (MIT), Sloan School of Management.
  5. Joel L. Schrag, 1999. "First Impressions Matter: A Model Of Confirmatory Bias," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 37-82, February.
  6. Waldman, Michael, 1994. "Systematic Errors and the Theory of Natural Selection," American Economic Review, American Economic Association, vol. 84(3), pages 482-97, June.
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