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Ludwig, Sandra and Wichardt, Philipp C. and Wickhorst, Hanke (2010): Overconfidence Can Improve an Agent's Relative and Absolute Performance in Contests. Discussion Papers in Economics 2010-35
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Abstract

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, forthcoming). 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 for the overconfident agent in absolute terms.