Overconfidence Can Improve an Agent's Relative and Absolute Performance in Contests
8 Pages Posted: 22 Dec 2009
Date Written: December 19, 2009
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, 2006). 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 of the overconfident agent in absolute terms.
Keywords: Overconfidence, Contests
JEL Classification: D21, D44, D82
Suggested Citation: Suggested Citation