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

By Sandra Ludwig, Philipp C. Wichardt and Hanke Wickhorst


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.

Topics: Volkswirtschaft, Diskussionsbeiträge, ddc:300, ddc:330
Year: 2010
DOI identifier: 10.1016/j.econlet.2010.11.040
OAI identifier:
Provided by: Open Access LMU

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