Beiträge zur Jahrestagung des Vereins für Socialpolitik 2014: Evidenzbasierte Wirtschaftspolitik - Session: Behavioral Economics D10-V2
The psychology literature provides ample evidence that people have difficulties taking the perspective of less informed others. This paper presents a controlled experiment showing that this "curse of knowledge" can cause comparative overconfidence and overentry into competition. In a broader context, the results provide an explanation for the overconfidence of nascent entrepreneurs and the substantial rate of failure among new businesses.
curse of knowledge hindsight bias information projection overconfidence sorting incentive schemes competition beliefs experiments