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Are Overconfident Players More Likely to Win Tournaments and Contests?

Luis Santos Pinto
Authors registered in the RePEc Author Service: Luis Santos-Pinto ()

Cahiers de Recherches Economiques du Département d'économie from Université de Lausanne, Faculté des HEC, Département d’économie

Abstract: This paper investigates whether an overconfident player is more likely to win a competition against a rational player. The two players are identical, except that the overconfident player overestimates his productivity of effort and, as a consequence, his probability of winning. The competition can take the form of either a tournament or a contest. The paper shows that the overconfident player is the Nash winner (loser) of a tournament with monotonic best responses when his effort and overconfidence are complements (substitutes). The overconfident player is the Nash winner (loser) of a tournament with non-monotonic best responses when he is slightly (significantly) overconfident. In contrast, the overconfident player is always the Nash loser of a contest. The paper also discusses the welfare implications of overconfidence.

Keywords: Overconfidence; Tournaments; Contests; Welfare (search for similar items in EconPapers)
JEL-codes: D60 D69 D91 (search for similar items in EconPapers)
Pages: 48 pp.
Date: 2021-05
New Economics Papers: this item is included in nep-exp, nep-gth, nep-hrm, nep-mic, nep-ore and nep-spo
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Citations: View citations in EconPapers (2)

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