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Overconfidence Can Improve an Agent's Relative and Absolute Performance in Contests

Author

Listed:
  • Ludwig, Sandra
  • Wichardt, Philipp C.
  • Wickhorst, Hanke

Abstract

This paper suggests a potential rationale for the recent empirical finding that overconfident agents tend to self-select into more competitive environments (e.g. Dohmen and Falk, forthcoming). In particular, it shows that moderate overconfidence in a contest can improve the agent's performance relative to an unbiased opponent and can even lead to an advantage for the overconfident agent in absolute terms.

Suggested Citation

  • Ludwig, Sandra & Wichardt, Philipp C. & Wickhorst, Hanke, 2010. "Overconfidence Can Improve an Agent's Relative and Absolute Performance in Contests," Discussion Papers in Economics 11885, University of Munich, Department of Economics.
  • Handle: RePEc:lmu:muenec:11885
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    File URL: https://epub.ub.uni-muenchen.de/11885/1/contestsletter_ELR1a.pdf
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    References listed on IDEAS

    as
    1. Luís Santos-Pinto, 2010. "Positive Self-Image In Tournaments," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(2), pages 475-496, May.
    2. Bjorn Bartling & Ernst Fehr & Michel Andre Marechal & Daniel Schunk, 2009. "Egalitarianism and Competitiveness," American Economic Review, American Economic Association, vol. 99(2), pages 93-98, May.
    3. Munetomo Ando, 2004. "Overconfidence in Economic Contests," Econometric Society 2004 Far Eastern Meetings 708, Econometric Society.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Vanessa Mertins & Wolfgang Hoffeld, 2013. "Do Overconfident Workers Cooperate Less? The Relationship between Overconfidence and Cooperation in Team Production," IAAEU Discussion Papers 201313, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    2. Zahra Murad & Martin Sefton & Chris Starmer, 2016. "How do risk attitudes affect measured confidence?," Journal of Risk and Uncertainty, Springer, vol. 52(1), pages 21-46, February.
    3. Robert Bordley & Marco LiCalzi & Luisa Tibiletti, 2014. "A target-based foundation for the "hard-easy effect" bias," Working Papers 23, Department of Management, Università Ca' Foscari Venezia.
    4. Chen, Si & Schildberg-Hörisch, Hannah, 2018. "Looking at the bright side: The motivation value of overconfidence," DICE Discussion Papers 291, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

    More about this item

    Keywords

    Overconfidence; Contests;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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