Skip to main content

Overconfidence in tournaments: evidence from the field

Abstract

This paper uses a field survey to investigate the quality of individuals’ beliefs of relative performance in tournaments. We consider two field settings, poker and chess, which differ in the degree to which luck is a factor and also in the information that players have about the ability of the competition. We find that poker players’ forecasts of relative performance are random guesses with an overestimation bias. Chess players also overestimate their relative performance but make informed guesses. We find support for the “unskilled and unaware hypothesis” in chess: high-skilled chess players make better forecasts than low-skilled chess players. Finally, we find that chess players’ forecasts of relative performance are not efficient.

This is a preview of subscription content, access via your institution.

References

  • Baker G., Jensen M., Murphy K. (1988) Compensation and incentives: Practice vs. theory. Journal of Finance XLIII(3): 593–616

    Article  Google Scholar 

  • Basu S., Markov S. (2004) Loss function assumptions in rational expectations tests on financial analysts earnings forecasts. Journal of Accounting and Economics 38: 171–203

    Article  Google Scholar 

  • Camerer C. (1990) Do markets correct biases in probability judgement? Evidence from market experiments. In: Kagel J., Green L. (eds) Advances in behavioral economics. Vol. 2. Ablex Publishing, Northwood, NJ, pp 125–172

    Google Scholar 

  • Camerer C., Lovallo D. (1999) Overconfidence and excess entry: An experimental approach. The American Economic Review 89(1): 306–318

    Article  Google Scholar 

  • Camerer C., Hogarth R. (1999) The effects of financial incentives in experiments: A review and capital-labor-production framework. Journal of Risk and Uncertainty 19: 7–42

    Article  Google Scholar 

  • Chen Z., Gionvanni A. (1992) Target zones and the distribution of exchange rates: An estimation method. Economics Letters 40(1): 83–89

    Article  Google Scholar 

  • Clark J., Friesen L. (2008) Overconfidence in forecasts of own performance: An experimental study. The Economic Journal 119(534): 229–251

    Article  Google Scholar 

  • DeGroot M. (1970) Optimal statistical decisions. McGraw Hill, New York

    Google Scholar 

  • Gervais S., Odean T. (2001) Learning to be overconfident. Review of Financial Studies 14(1): 1–27

    Article  Google Scholar 

  • Hoelzl E., Rustichini A. (2005) Overconfident: Do you put your money on it?. The Economic Journal 115: 305–318

    Article  Google Scholar 

  • Kruger J. (1999) Lake Wobegon be gone! The below-average effect and the egocentric nature of comparative ability judgments. Journal of Personality and Social Psychology 77(2): 221–232

    Article  Google Scholar 

  • Kruger J., Dunning D. (1990) Unskilled and unaware of it: How difficulties in recognizing one’s own incompetence lead to inflated self-assessments. Journal of Personality and Social Psychology 77: 1121–1134

    Article  Google Scholar 

  • Moore, D. (2002). Egocentric biases and the failure of strategic prediction. In International Association of Conflict Management, 15th Annual Conference, June 9–12, Park City, Utah.

  • Moore D., Kim T. (2003) Myopic social prediction and the solo comparison paradox. Journal of Personality and Social Psychology 85(6): 1121–1135

    Article  Google Scholar 

  • Myers D. (1996) Social psychology. McGraw-Hill, New York

    Google Scholar 

  • Niederle M., Vesterlund L. (2007) Do women shy away from competition? Do men compete too much?. Quarterly Journal of Economics 122(3): 1067–1101

    Article  Google Scholar 

  • Rabin M. (1998) Psychology and economics. Journal of Economic Literature XXXVI: 11–46

    Google Scholar 

  • Santos-Pinto L., Sobel J. (2005) A model of positive self image in subjective assessments. The American Economic Review 95(5): 1386–1402

    Article  Google Scholar 

  • Svenson O. (1981) Are we all less risky and more Skillful than our fellow drivers. Acta Psychologica 94: 143–148

    Article  Google Scholar 

  • Van den Steen E. (2004) Rational overoptimism (and other biases). American Economic Review 94(4): 1141–1151

    Article  Google Scholar 

  • Zarembka P. (1974) Transformation of variables in econometrics. In: Zarembka Paul (eds) Frontiers in econometrics. Academic Press, New York

    Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Luís Santos-Pinto.

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Park, Y.J., Santos-Pinto, L. Overconfidence in tournaments: evidence from the field. Theory Decis 69, 143–166 (2010). https://doi.org/10.1007/s11238-010-9200-0

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11238-010-9200-0

Keywords

  • Tournaments
  • Rationality
  • Field experiment

JEL Classification

  • A12
  • C93
  • J41