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Autor:innen: 
Erscheinungsjahr: 
2019
Schriftenreihe/Nr.: 
Cardiff Economics Working Papers No. E2019/17
Verlag: 
Cardiff University, Cardiff Business School, Cardiff
Zusammenfassung: 
Why do contests exist in settings where negotiation provides a costless alternative? I assess a new explanation: parties may be overconfident about their ability or optimistic about their chances of winning. For both parties in a contest, this hubris: (i) reduces the incentive to exit the contest; (ii) reduces effort; and(iii) increases expected payoffs. Whilst hubris leads to the contest being preferred to costless negotiation, the welfare loss is nonmonotonic in either behavioural bias.
Schlagwörter: 
Contests
Optimism bias
Overconfidence bias
Negotiation
JEL: 
C71
D74
D91
Dokumentart: 
Working Paper

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