Overconfidence in Economic Contests
No 708, Econometric Society 2004 Far Eastern Meetings from Econometric Society
This paper studies an economic contest with two participants, who have overconfidence in their own relative abilities. We examine two different sources of overconfidence, overestimation of one's own ability and underestimation of the rival's ability, and compare the behavioral consequences of each situation with the correctly estimated case. The main result is that the former always induces the participants' aggressive behavior, while the latter does not.
Keywords: Overconfidence; economic contest; relative ability; all-pay auction (search for similar items in EconPapers)
JEL-codes: D D82 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ecm:feam04:708
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