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Confidence-Enhanced Performance

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  • Olivier Compte

    ()
    (CERAS, Ecole nationale des Ponts et Chaussees)

  • Andrew Postlewaite

    ()
    (Department of Economics, University of Pennsylvania)

Abstract

There is ample evidence that emotions affect performance. Positive emotions can improve performance, while negative ones may 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 successes of failures. 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 own 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 first phenomenon above 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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Bibliographic Info

Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 03-009.

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Length: 31 pages
Date of creation: 01 Mar 2003
Date of revision:
Handle: RePEc:pen:papers:03-009

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Keywords: confidence; perception; psychology;

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  1. Eric, Van den Steen, 2002. "Skill or Luck? Biases of Rational Agents," Working papers, Massachusetts Institute of Technology (MIT), Sloan School of Management 4255-02, Massachusetts Institute of Technology (MIT), Sloan School of Management.
  2. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, American Economic Association, vol. 83(5), pages 1281-1302, December.
  3. Geanakoplos, John & Pearce, David & Stacchetti, Ennio, 1989. "Psychological games and sequential rationality," Games and Economic Behavior, Elsevier, Elsevier, vol. 1(1), pages 60-79, March.
  4. Joel L. Schrag, 1999. "First Impressions Matter: A Model Of Confirmatory Bias," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(1), pages 37-82, February.
  5. Roland BĂ©nabou & Jean Tirole, 2002. "Self-Confidence And Personal Motivation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 117(3), pages 871-915, August.
  6. Waldman, Michael, 1994. "Systematic Errors and the Theory of Natural Selection," American Economic Review, American Economic Association, American Economic Association, vol. 84(3), pages 482-97, June.
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