Self-Confidence and Strategic Behavior

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Self-Confidence and Strategic Behavior AbstractWe test experimentally an explanation of over and under confidence as motivated by (perhaps unconscious) strategic concerns, and find compelling evidence supporting this hypothesis in the behavior of participants who send and respond to others' statements of confidence about how well they have scored on an IQ test. In two-player tournaments where the highest score wins, one is likely to enter at equilibrium when he knows that his stated confidence is higher than the other player's, but very unlikely when the reverse is true. Consistent with this behavior, stated confidence by males is inflated when deterrence is strategically optimal and is instead deflated by males and females when hustling (encouraging entry) is strategically optimal. This behavior is consistent with the equilibrium of the corresponding signaling game. Based on the theory of salient perturbations, we propose a strategic foundation of overconfidence. Since overconfident statements are used in familiar situations in which it is strategically effective, it may also occur in the absence of strategic benefits, provided the environment is similar.JEL-Code: A120, C910, D030, D820.

Image and Misreporting

“…This allows us to establish causality between the desire to gain a favorable image and the statement of overly optimistic self‐assessments. Charness, Rustichini, and van de Ven () provide experimental evidence that individuals exploit the possibility to send an exaggerated self‐assessment in a strategic interaction of a tournament entry game, in order to deter entry of others. This differs from but nicely complements our main finding that the mere presence of an audience (in the absence of strategic incentives) can generate overly optimistic self‐assessments.…”

“…(2006), or Möbius et al (2013). Recently, several experimental papers have provided support for biases in information-processing and information demand-see Eil and Rao (2011), Möbius et al (2013) and Charness, Rustichini, and van de Ven (2013). Benoît and Dubra (2011) provide a different explanation.…”

Information Processing and Commitment

“…In the context of overconfidence, one explanation that has been brought forward assumes a value of self-confidence and shows how overconfidence can be produced and sustained by selectively choosing information or by asymmetrically processing information, putting more weight on positive than on negative information (Brunnermeier and Parker, 2005;Falk et al, 2006;K€ oszegi, 2006;Moebius et al, 2013). 5 Another explanation stresses the role of social signalling for overconfidence (Burks et al, 2013;Charness et al, 2014;Ewers and Zimmermann, 2015). If overconfidence is driven by a desire to signal skills or abilities to others, then individuals can appear overconfident even in the absence of any belief biases.…”

“…Falk and Zimmermann (2017) provide a model where consistency preferences arise from a desire to signal skills towards others, building on an intuition in Cialdini (1984). 5 Recently, there has been empirical support for biases in information-processing and information demand (Eil and Rao, 2011;Moebius et al, 2013;Charness et al, 2014). 6 Notice that Benoît and Dubra (2011) have provided a different explanation for overconfidence and argue that in fact most of the evidence for relative overconfidence can be reconciled by correct Bayesian updating from common priors.…”

Doubts and Dogmatism in Conflict Behaviour

“…We believe that even in these alternative settings, the actions of the principle would be driven by similar considerations. We expect, for instance, that a principal with low altruism would motivate the agent by boosting his overconfidence (a similar motive is described by Charness et al ., ), while a more altruistic principal would tend to discourage overconfidence in order to de‐escalate the conflict.…”