Learning and self-confidence in contests

Lernen und Selbstvertrauen in Wettkämpfen

Daniel Krähmer

Discussion Papers, Research Unit: Market Processes and Governance from WZB Berlin Social Science Center

Abstract: The paper studies a repeated contest when contestants are uncertain about their true abilities. A favourable belief about one’s own ability (confidence) stimulates effort and increases the likelihood of success. Success, in turn, reinforces favourable beliefs. We consider a specific example in which this reinforcement mechanism implies that, with positive probability, players fail to learn their true abilities, and one player may eventually win the contest forever. As a consequence, persistent inequality arises, and the worse player may eventually prevail. Furthermore, confidence is self-serving in that it increases a player’s utility and the likelihood to be the long-run winner.

Keywords: Contest; self-confidence; belief reinforcement; incomplete learning; dynamic programming (search for similar items in EconPapers)
JEL-codes: C3 C61 D44 D83 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:wzbmpg:spii200310

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