eprintid: 29513
rev_number: 17
eprint_status: archive
userid: 3114
dir: disk0/00/02/95/13
datestamp: 2021-03-31 12:40:37
lastmod: 2021-04-26 11:26:17
status_changed: 2021-03-31 12:40:37
type: workingPaper
metadata_visibility: show
creators_name: Soldà, Alice
creators_name: Ke, Changxia
creators_name: von Hippel, William
creators_name: Page, Lionel
title: Absolute vs. relative success: Why overconfidence is an inefficient equilibrium
subjects: 330
divisions: 181000
keywords: overconfidence, motivated beliefs, negotiation
abstract: 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
id_scheme: DOI
id_number: 10.11588/heidok.00029513
schriftenreihe_cluster_id: sr-3
schriftenreihe_order: 0700
ppn_swb: 1752410173
own_urn: urn:nbn:de:bsz:16-heidok-295132
language: eng
bibsort: SOLDAALICEABSOLUTEVS202103
full_text_status: public
series: Discussion Paper Series / University of Heidelberg, Department of Economics
volume: 0700
place_of_pub: Heidelberg
pages: 22
citation:   Soldà, Alice ; Ke, Changxia ; von Hippel, William ; Page, Lionel  (2021) Absolute vs. relative success: Why overconfidence is an inefficient equilibrium.  [Working paper]     
document_url: https://archiv.ub.uni-heidelberg.de/volltextserver/29513/7/Solda_et_al_2021_dp700.pdf