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Positive Self-Image in Tournaments

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  • Pinto, Luis Santos
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    Abstract

    This paper analyzes the implications of worker overestimation of productivity for firms in which incentives take the form of tournaments. Each worker overestimates his productivity but is aware of the bias in his opponent’s self-assessment. The manager of the firm, on the other hand, correctly assesses workers’ productivities and self-beliefs when setting tournament prizes. The paper shows that, under a variety of circumstances, firms make higher profits when workers have positive self-image than if workers do not. By contrast, workers’ welfare declines due to their own misguided choices.

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    File URL: http://fesrvsd.fe.unl.pt/WPFEUNL/WP2007/wp510.pdf
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    Bibliographic Info

    Paper provided by Universidade Nova de Lisboa, Faculdade de Economia in its series FEUNL Working Paper Series with number wp510.

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    Length: 29 pages
    Date of creation: 2007
    Date of revision:
    Handle: RePEc:unl:unlfep:wp510

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    Cited by:
    1. Sandra Ludwig & Julia Nafziger, 2007. "Do You Know That I Am Biased? An Experiment," Bonn Econ Discussion Papers bgse11_2007, University of Bonn, Germany.
    2. Sandra Ludwig & Julia Nafziger, 2011. "Beliefs about overconfidence," Theory and Decision, Springer, vol. 70(4), pages 475-500, April.

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