Overconfidence and excess entry: an experimental approach

Article Abstract:

The influence of optimistic biases or overconfidence on economic behavior is studied with respect to entry into competitive markets. An experimental setting linking personal overconfidence with economic decisions was created with basic features of business entry situations. The results showed that when subjects' post-entry payoffs are based on their own abilities, chances of relative success were overestimated. Self-selection in the experimental sessions resulted in an even more pronounced overconfidence.

Research, Self-confidence, Self confidence, Business failures

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Iterated dominance and iterated best response in experimental 'p-Beauty Contests'

Article Abstract:

The application of the iterated dominance and iterated best response in experimental 'p-Beauty Contests' models showed that the convergence of the factors into a best response is dependent on the rationality threshold. In finite rationality thresholds, both factors converge quickly and reliably while in infinite rationality thresholds shows a slower convergence due to the learning behavior exhibited by the various group sizes.

Economics, Research and Development in the Social Sciences and Humanities, Models, Economic research, Game theory, Resource allocation

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