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Learning and self-confidence in contests
[Lernen und Selbstvertrauen in Wettkämpfen]

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  • Krähmer, Daniel

Abstract

The paper studies a repeated contest when contestants are uncertain about their true abilities. A favourable belief about one’s own ability (confidence) stimulates effort and increases the likelihood of success. Success, in turn, reinforces favourable beliefs. We consider a specific example in which this reinforcement mechanism implies that, with positive probability, players fail to learn their true abilities, and one player may eventually win the contest forever. As a consequence, persistent inequality arises, and the worse player may eventually prevail. Furthermore, confidence is self-serving in that it increases a player’s utility and the likelihood to be the long-run winner.

Suggested Citation

  • Krähmer, Daniel, 2003. "Learning and self-confidence in contests [Lernen und Selbstvertrauen in Wettkämpfen]," Discussion Papers, Research Unit: Market Processes and Governance SP II 2003-10, WZB Berlin Social Science Center.
    • Handle: RePEc:zbw:wzbmpg:spii200310
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    File URL: https://www.econstor.eu/bitstream/10419/51130/1/376523212.pdf
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    References listed on IDEAS

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    Cited by:

    1. John A. Doukas & Dimitris Petmezas, 2007. "Acquisitions, Overconfident Managers and Self‐attribution Bias," European Financial Management, European Financial Management Association, vol. 13(3), pages 531-577, June.
    2. Hayward, Mathew L.A. & Forster, William R. & Sarasvathy, Saras D. & Fredrickson, Barbara L., 2010. "Beyond hubris: How highly confident entrepreneurs rebound to venture again," Journal of Business Venturing, Elsevier, vol. 25(6), pages 569-578, November.

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    More about this item

    Keywords

    Contest; self-confidence; belief reinforcement; incomplete learning; dynamic programming;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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