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Are Overconfident Players More Likely to Win Tournaments and Contests?

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  • Luis Santos Pinto

Abstract

This paper investigates whether an overconfident player is more likely to win a competition against a rational player. The two players are identical, except that the overconfident player overestimates his productivity of effort and, as a consequence, his probability of winning. The competition can take the form of either a tournament or a contest. The paper shows that the overconfident player is the Nash winner (loser) of a tournament with monotonic best responses when his effort and overconfidence are complements (substitutes). The overconfident player is the Nash winner (loser) of a tournament with non-monotonic best responses when he is slightly (significantly) overconfident. In contrast, the overconfident player is always the Nash loser of a contest. The paper also discusses the welfare implications of overconfidence.

Suggested Citation

  • Luis Santos Pinto, 2021. "Are Overconfident Players More Likely to Win Tournaments and Contests?," Cahiers de Recherches Economiques du Département d'économie 21.06a, Université de Lausanne, Faculté des HEC, Département d’économie.
    • Handle: RePEc:lau:crdeep:21.06a
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    Cited by:

    1. Spencer Bastani & Thomas Giebe & Oliver Gürtler, 2023. "Overconfidence and Gender Equality in the Labor Market," ECONtribute Discussion Papers Series 220, University of Bonn and University of Cologne, Germany.

    More about this item

    Keywords

    Overconfidence; Tournaments; Contests; Welfare;
    All these keywords.

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • D69 - Microeconomics - - Welfare Economics - - - Other
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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