On the Evolution of Overconfidence and Entrepreneurs

Antonio Bernardo and Ivo Welch
Additional contact information
Antonio Bernardo: University of California, Los Angeles

No 1307, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: This paper explains why seemingly irrational overconfident behavior can persist. Information aggregation is poor in groups in which most individuals herd. By ignoring the herd, the actions of overconfident individuals ("entrepreneurs") convey their private information. However, entrepreneurs make mistakes and thus die more frequently. The socially optimal proportion of entrepreneurs trades off the positive information externality against high attrition rates of entrepreneurs, and depends on the size of the group, on the degree of overconfidence, and on the accuracy of individuals' private information. The stationary distribution trades off the fitness of the group against the fitness of overconfident individuals.

Keywords: Evolution; overconfidence; behavioral economics (search for similar items in EconPapers)
JEL-codes: D7 L2 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2001-06
New Economics Papers: this item is included in nep-ent, nep-mic and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (219)

Downloads: (external link)
https://cowles.yale.edu/sites/default/files/files/pub/d13/d1307.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Working Paper: On the Evolution of Overconfidence and Entrepreneurs (2003)
Working Paper: On the Evolution of Overconfidence and Entrepreneurs (2003)
Journal Article: On the Evolution of Overconfidence and Entrepreneurs (2001)
Working Paper: On the Evolution of Overconfidence and Entrepreneurs (1997)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cwl:cwldpp:1307

Ordering information: This working paper can be ordered from
Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
The price is None.

Access Statistics for this paper

More papers in Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University Yale University, Box 208281, New Haven, CT 06520-8281 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Brittany Ladd ().