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Overconfidence Due to a Self-reliance Dilemma

Author

Listed:
  • Gergely Hajdu

    (Department of Economics, Vienna University of Economics and Business)

  • Nikola Frollová

    (Department of Management, Prague University of Economics and Business)

Abstract

Choosing between payment based on one’s own performance or others’ is inherent in most delegation decisions. We propose and test that such self-reliance dilemma could result in motivated reasoning about own and others’ performances. Participants in an experiment face this dilemma and learn about it either before or after reporting their beliefs. We find that learning about the dilemma decreases participants’ beliefs about their counterpart’s performance advantage (CPA) by an average of 17%. Furthermore, it causes an average overestimation of one’s own performance and increases the fraction of participants who falsely believe they outperformed their counterpart. Organizations should, therefore, carefully manage delegation decisions and implement measures to curb overconfidence.

Suggested Citation

  • Gergely Hajdu & Nikola Frollová, 2024. "Overconfidence Due to a Self-reliance Dilemma," Department of Economics Working Papers wuwp363, Vienna University of Economics and Business, Department of Economics.
    • Handle: RePEc:wiw:wiwwuw:wuwp363
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    More about this item

    Keywords

    overconfidence; self-reliance; motivated reasoning;
    All these keywords.

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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