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Positive Self-Image In Tournaments

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  • Luís Santos-Pinto

Abstract

This article analyzes the implications of worker overestimation of productivity for firms in which incentives take the form of tournaments. Each worker overestimates his productivity but is aware of the bias in his opponent's self-assessment. The manager of the firm, on the other hand, correctly assesses workers' productivities and self-beliefs when setting tournament prizes. The article shows that, under a variety of circumstances, firms can benefit from worker positive self-image. The article also shows that worker positive self-image can improve welfare in tournaments. In contrast, workers' utility declines due to their own misguided choices. Copyright (2010) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Luís Santos-Pinto, 2010. "Positive Self-Image In Tournaments," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(2), pages 475-496, May.
    • Handle: RePEc:ier:iecrev:v:51:y:2010:i:2:p:475-496
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Sandra Ludwig & Julia Nafziger, 2011. "Beliefs about overconfidence," Theory and Decision, Springer, vol. 70(4), pages 475-500, April.
    2. Valeria Maggian & Antonio Nicolò, 2016. "The wrong man for the job: biased beliefs and job mismatching," Post-Print halshs-01324733, HAL.
    3. Ludwig, Sandra & Wichardt, Philipp C. & Wickhorst, Hanke, 2011. "Overconfidence can improve an agent's relative and absolute performance in contests," Economics Letters, Elsevier, vol. 110(3), pages 193-196, March.
    4. de la Rosa, Leonidas Enrique, 2011. "Overconfidence and moral hazard," Games and Economic Behavior, Elsevier, vol. 73(2), pages 429-451.
    5. Dohmen, Thomas, 2014. "Behavioral labor economics: Advances and future directions," Labour Economics, Elsevier, vol. 30(C), pages 71-85.
    6. Vanessa Mertins & Wolfgang Hoffeld, 2015. "Do Overconfident Workers Cooperate Less? The Relationship Between Overconfidence and Cooperation in Team Production," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 36(4), pages 265-274, June.
    7. Spencer Bastani & Thomas Giebe & Oliver Gürtler, 2023. "Overconfidence and Gender Equality in the Labor Market," ECONtribute Discussion Papers Series 220, University of Bonn and University of Cologne, Germany.
    8. Hendrik Hakenes & Svetlana Katolnik, 2018. "Optimal Team Size and Overconfidence," Group Decision and Negotiation, Springer, vol. 27(4), pages 665-687, August.
    9. Chen, Si & Schildberg-Hörisch, Hannah, 2019. "Looking at the bright side: The motivational value of confidence," European Economic Review, Elsevier, vol. 120(C).
    10. Legge, Stefan & Schmid, Lukas, 2013. "Rankings, Random Successes, and Individual Performance," Economics Working Paper Series 1340, University of St. Gallen, School of Economics and Political Science.
    11. Simon Dato & Andreas Grunewald & Daniel Müller, 2018. "Expectation-based loss aversion and rank-order tournaments," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 66(4), pages 901-928, December.

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    More about this item

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines

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