Never underestimate your opponent: Hindsight bias causes overplacement and overentry into competition

• 成果类型: Article
• 署名作者: Danz, David
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); University of Pittsburgh
• 刊物名称: GAMES AND ECONOMIC BEHAVIOR
• ISSN/ISSBN: 0899-8256
• DOI: 10.1016/j.geb.2020.10.001
• 发表日期: 2020
• 页码: 588-603
• 关键词: Overconfidence; tournament; Hindsight bias; Curse of knowledge; Information projection; beliefs; entrepreneurship

摘要

This study investigates a source of comparative overconfidence, or overplacement, which occurs when people overestimate themselves relative to others. We present a simple application of information projection (Madarasz, 2012) to show that hindsight bias can lead to overplacement and excessive willingness to compete. We run an experiment in which subjects choose between a competitive tournament and piece-rate compensation after observing some of their competitors' past performance. We exogenously manipulate whether subjects have ex post information about their competitors' past tasks (hindsight) or not (no hindsight). We find that hindsight bias generates overplacement and increases subjects' valuation of tournament participation by 19%. In line with theory, the additional tournament entry in the hindsight setting is driven by low-performing participants who should not have entered the tournament. (c) 2020 Elsevier Inc. All rights reserved.