<p>We investigate the role of overconfidence in Tullock contests. An overconfident player overestimates the impact of his effort on the outcome of the contest. We find that when overconfidence is high relative to the number of players, an increase in overconfidence lowers equilibrium efforts. However, the opposite happens when overconfidence is low relative to the number of players. We demonstrate that overdissipation can occur due to overconfidence. We show that an increase in overconfidence unambiguously leads to an increase in the number of entrants. We finally introduce heterogeneity in confidence and ability. We show that overconfidence can deter rational players from participating, and-when coupled with lower true ability-leads overconfident players to exert lower equilibrium effort.</p>

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Overconfidence in tullock contests

  • Luis Santos-Pinto,
  • Petros G. Sekeris

摘要

We investigate the role of overconfidence in Tullock contests. An overconfident player overestimates the impact of his effort on the outcome of the contest. We find that when overconfidence is high relative to the number of players, an increase in overconfidence lowers equilibrium efforts. However, the opposite happens when overconfidence is low relative to the number of players. We demonstrate that overdissipation can occur due to overconfidence. We show that an increase in overconfidence unambiguously leads to an increase in the number of entrants. We finally introduce heterogeneity in confidence and ability. We show that overconfidence can deter rational players from participating, and-when coupled with lower true ability-leads overconfident players to exert lower equilibrium effort.