title: Absolute vs. relative success: Why overconfidence is an inefficient equilibrium
creator: Soldà, Alice
creator: Ke, Changxia
creator: von Hippel, William
creator: Page, Lionel
subject: 330
subject: 330 Economics
description: Overconfidence is one of the most ubiquitous biases in the social sciences, but the evidence regarding its overall costs and benefits is mixed. To test the possibility that overconfidence might yield important relative benefits that offset its absolute costs, we conducted an experiment (N=298 university students) in which pairs of participants bargain over the unequal allocation of a prize that was earned via a joint effort. We manipulated confidence using a binary noisy signal to investigate the causal effect of negotiators’ beliefs about their relative contribution on the outcome of the negotiation. Our results provide evidence that high levels of confidence lead to relative benefits (how much one earns compared to one’s partner) but absolute costs (how much money one receives overall). These results suggest that overconfidence creates an inefficient equilibrium whereby overconfident negotiators benefit over their partners even as they bring about joint losses.
date: 2021-03
type: Working paper
type: info:eu-repo/semantics/workingPaper
type: NonPeerReviewed
format: application/pdf
identifier: https://archiv.ub.uni-heidelberg.de/volltextserverhttps://archiv.ub.uni-heidelberg.de/volltextserver/29513/7/Solda_et_al_2021_dp700.pdf
identifier: DOI:10.11588/heidok.00029513
identifier: urn:nbn:de:bsz:16-heidok-295132
identifier:   Soldà, Alice ; Ke, Changxia ; von Hippel, William ; Page, Lionel  (2021) Absolute vs. relative success: Why overconfidence is an inefficient equilibrium.  [Working paper]     
relation: https://archiv.ub.uni-heidelberg.de/volltextserver/29513/
rights: info:eu-repo/semantics/openAccess
rights: http://archiv.ub.uni-heidelberg.de/volltextserver/help/license_urhg.html
language: eng