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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

Abstract: 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
Date: 2014
References: View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

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https://www.econstor.eu/bitstream/10419/101453/1/796700478.pdf (application/pdf)

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Working Paper: The curse of knowledge increases self-selection into competition: Experimental evidence (2014) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:wzbmbh:spii2014207

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