Abstract

http://ssrn.com/abstract=470787
 
 

References (28)



 
 

Citations (7)



 


 



Overconfidence and Team Coordination


Simon Gervais


Duke University - Fuqua School of Business

Itay Goldstein


University of Pennsylvania - The Wharton School - Finance Department

November 2003



Abstract:     
We model a team in which the marginal productivity of a player increases with the effort of other players on the team. Because the effort of any player is not observable to any other player, the performance of the team is negatively affected by a free-rider problem and by a lack of effort coordination across players. We show that, in this context, the overconfidence of some players not only enhances team performance but may create a Pareto improvement at the individual level. Indeed, because an overconfident player overestimates his marginal productivity, his decision to exert effort does not require as much expected effort from other players. Knowing that this overconfident player works hard and thus increases their marginal productivity, other players work harder too. This concerted effort by all benefits the team, the rational players and, in some cases, the overconfident player, who overworks but benefits from the positive externality that other players working harder brings about. Such Pareto improvement may provide a rationale for individual overconfidence to perpetuate itself in firms and partnerships.

Number of Pages in PDF File: 32

Keywords: Overconfidence, Team Effort, Coordination

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Date posted: December 10, 2003  

Suggested Citation

Gervais, Simon and Goldstein, Itay, Overconfidence and Team Coordination (November 2003). Available at SSRN: http://ssrn.com/abstract=470787 or http://dx.doi.org/10.2139/ssrn.470787

Contact Information

Simon Gervais
Duke University - Fuqua School of Business ( email )
100 Fuqua Drive
Box 90120
Durham, NC 27708-0120
United States
919-660-7683 (Phone)
919-883-5078 (Fax)
HOME PAGE: http://www.fuqua.duke.edu/faculty_research/faculty_directory/gervais/
Itay Goldstein (Contact Author)
University of Pennsylvania - The Wharton School - Finance Department ( email )
The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
215-746-0499 (Phone)

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