Overconfidence and conflict

Maxime Menuet and Petros Sekeris

Economic Inquiry, 2021, vol. 59, issue 4, 1483-1499

Abstract: This paper studies the causes and duration of conflicts with a war of attrition game featuring overconfident players. We find that overconfidence is neither necessary, nor sufficient to have conflict. Overconfident decision makers are nevertheless more likely to initiate conflict, and to also remain active longer in a conflict. Our main results are that (i) the degree of overconfidence and conflict duration may have an inverted U‐shaped relationship, and (ii) the outcome of the war of attrition may be in favor of a weaker, yet overconfident player. We argue that this simple model helps understanding a host of real‐world conflictive situations.

Date: 2021
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https://doi.org/10.1111/ecin.13003

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