Overconfidence, Misjudgment, and Market Entry: Experimental Evidence from Panama

15 Pages Posted: 18 Jun 2019

Date Written: June 10, 2019

Abstract

This paper investigates how overconfidence (as an endogenous characteristic of the decision-maker) and misjudgment of merit (as an exogenous property of the market) influence the decision to enter a competitive market. In the experimental design, we use a heterogeneous subject pool composed of people with different knowledge of entrepreneurship: full-time entrepreneurs, part-time entrepreneurs, salespeople, MBA students, women attending a course in entrepreneurship, and members of criminal gangs. We find that overconfidence is a determinant of market entry, and in the presence of merit-misjudgment, overconfidence becomes more relevant for individuals already embedded in an entrepreneurial network.

Keywords: Overconfidence, Misjudgment, Entry, Entrepreneurship

JEL Classification: C91; D29; O17

Suggested Citation

Rotondi, Valentina, Overconfidence, Misjudgment, and Market Entry: Experimental Evidence from Panama (June 10, 2019). Available at SSRN: https://ssrn.com/abstract=3145036 or http://dx.doi.org/10.2139/ssrn.3145036

Valentina Rotondi (Contact Author)

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

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