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Looking at the Bright Side: The Motivation Value of Overconfidence

Author

Listed:
  • Chen, Si

    () (Bonn Graduate School of Economics)

  • Schildberg-Hörisch, Hannah

    () (Heinrich Heine University Düsseldorf)

Abstract

The motivation value of confidence postulates that individual effort provision is increasing in beliefs on one's own productivity. This relationship also holds for overconfident individuals who have exaggerated productivity beliefs (motivation value of overconfidence). We present first empirical evidence on the existence of a motivation value of absolute overconfidence that many microeconomic models build on. Moreover, we document that debiasing information increases the accuracy of productivity beliefs of overconfident individuals but comes at the cost of diminished effort provision – a result that is of obvious relevance for many contexts such as labor relations or learning at school. As a further conceptual contribution, we offer a novel strategy for identifying significant overconfidence at the individual level.

Suggested Citation

  • Chen, Si & Schildberg-Hörisch, Hannah, 2018. "Looking at the Bright Side: The Motivation Value of Overconfidence," IZA Discussion Papers 11564, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp11564
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    References listed on IDEAS

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    Cited by:

    1. Benjamin Elsner & Ingo E. Isphording & Ulf Zölitz, 2018. "Achievement rank affects performance and major choices in college," ECON - Working Papers 300, Department of Economics - University of Zurich.

    More about this item

    Keywords

    overconfidence; effort provision; laboratory experiment;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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