The curse of knowledge increases self-selection into competition: Experimental evidence
David Danz ()
No SP II 2014-207, Discussion Papers, Research Unit: Market Behavior from WZB Berlin Social Science Center
The psychology literature provides ample evidence that people have difficulties taking the perspective of less-informed others. This paper presents a controlled experiment showing that this "curse of knowledge" can cause comparative overconfidence and overentry into competition. In a broader context, the results provide an explanation for the overconfidence of nascent entrepreneurs and the substantial rate of failure among new businesses.
Keywords: curse of knowledge; hindsight bias; information projection; overconfidence; sorting; incentive schemes; competition; beliefs; experiments (search for similar items in EconPapers)
JEL-codes: C91 D80 D82 D83 D84 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-cse, nep-cta, nep-ent, nep-exp and nep-knm
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Working Paper: The curse of knowledge increases self-selection into competition: Experimental evidence (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:wzbmbh:spii2014207
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