Article ID: | iaor20111762 |
Volume: | 57 |
Issue: | 1 |
Start Page Number: | 93 |
End Page Number: | 106 |
Publication Date: | Jan 2011 |
Journal: | Management Science |
Authors: | Radzevick Joseph R, Moore Don A |
Keywords: | commerce |
In this paper, we investigate how market competition contributes to the expression of overconfidence among those competing for influence. We find evidence that market competition exacerbates the tendency to express excessive confidence. This evidence comes from experiments in which advisors attempt to sell their advice. In the first, advisors must compete with other advice sellers. In the second, advisors and their customers are paired. Advisors are overconfident in both studies and it helps advisors sell their advice. However, competition between advisors in the market further exacerbates overconfidence. In a third study, we demonstrate that the market competition drives overconfidence even when advisors vary in quality. We also investigate the strategic expressions and interpretations of confidence by both sides in the exchange.