Overconfidence Due to a Self-reliance Dilemma

Gergely Hajdu and Nikola Frollová

No 363, Department of Economics Working Paper Series from WU Vienna University of Economics and Business

Abstract: Choosing between payment based on one’s own performance or others’ is inherent in most delegation decisions. We propose and test that such self-reliance dilemma could result in motivated reasoning about own and others’ performances. Participants in an experiment face this dilemma and learn about it either before or after reporting their beliefs. We find that learning about the dilemma decreases participants’ beliefs about their counterpart’s performance advantage (CPA) by an average of 17%. Furthermore, it causes an average overestimation of one’s own performance and increases the fraction of participants who falsely believe they outperformed their counterpart. Organizations should, therefore, carefully manage delegation decisions and implement measures to curb overconfidence.

Keywords: overconfidence; self-reliance; motivated reasoning (search for similar items in EconPapers)
Date: 2024-04
New Economics Papers: this item is included in nep-exp and nep-neu
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Working Paper: Overconfidence Due to a Self-reliance Dilemma (2024)
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