Over-Confidence and Entrepreneurial Choice Under Ambiguity

39 Pages Posted: 24 May 2013

See all articles by Anisa Shyti

Anisa Shyti

HEC Paris - Strategy & Business Policy

Date Written: May 21, 2013

Abstract

Entrepreneurship studies have attributed to over-confidence decisions to start a new venture. Many decision situations, through which over-confidence is measured, entail some degrees of uncertainty, (e.g., related to own skill or to competition). The aspect of uncertainty is largely neglected in over-confidence studies or entrepreneurial research. Both uncertainty and over-confidence influence individuals’ likelihood perceptions. Nevertheless, these two aspects are seldom jointly investigated, and the little evidence provides inconclusive results.

In this study, we experimentally investigate how uncertainty, as a property of the situation, and over-confidence, as a characteristic of decision makers’ beliefs, influence choice behavior. Our findings with Executive MBA participants show that over-confident decision makers choose less uncertain options for low likelihood outcomes and more uncertain options for high likelihood outcomes, contrary to neutral confidence decision makers, whose choices are in line with standard Prospect Theory predictions.

Keywords: entrepreneurship, ambiguity attitudes, decision making, over-con fidence

JEL Classification: D08, D81, L26

Suggested Citation

Shyti, Anisa, Over-Confidence and Entrepreneurial Choice Under Ambiguity (May 21, 2013). HEC Paris Research Paper No. SPE-2013-982, Available at SSRN: https://ssrn.com/abstract=2267968 or http://dx.doi.org/10.2139/ssrn.2267968

Anisa Shyti (Contact Author)

HEC Paris - Strategy & Business Policy ( email )

Jouy-en-Josas Cedex, 78351
France

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