Overconfidence Can Improve an Agent's Relative and Absolute Performance in Contests

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

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.

• Item Type: Paper (Discussion Paper)
• Status: Preprint
• Keywords: Overconfidence, Contests
• Collections: Economics; Economics > Discussion Papers in Economics
• Subjects: 300 Social sciences > 300 Social sciences, sociology and anthropology; 300 Social sciences > 330 Economics
• JEL Classification: D21, D44, D82
• Language: English