Competing to Be Certain (But Wrong): Market Dynamics and Excessive Confidence in Judgment

Joseph R. Radzevick () and Don A. Moore ()
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Joseph R. Radzevick: Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213
Don A. Moore: Haas School of Business, University of California, Berkeley, Berkeley, California 94720

Management Science, 2011, vol. 57, issue 1, 93-106

Abstract: In this paper, we investigate how market competition contributes to the expression of overconfidence among those competing for influence. We find evidence that market competition exacerbates the tendency to express excessive confidence. This evidence comes from experiments in which advisors attempt to sell their advice. In the first, advisors must compete with other advice sellers. In the second, advisors and their customers are paired. Advisors are overconfident in both studies and it helps advisors sell their advice. However, competition between advisors in the market further exacerbates overconfidence. In a third study, we demonstrate that the market competition drives overconfidence even when advisors vary in quality. We also investigate the strategic expressions and interpretations of confidence by both sides in the exchange. This paper was accepted by Peter Wakker, decision analysis.

Keywords: overconfidence; advice; competition; markets; judgment (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:57:y:2011:i:1:p:93-106

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