Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/257462 
Year of Publication: 
2020
Citation: 
[Journal:] Games [ISSN:] 2073-4336 [Volume:] 11 [Issue:] 4 [Article No.:] 44 [Publisher:] MDPI [Place:] Basel [Year:] 2020 [Pages:] 1-19
Publisher: 
MDPI, Basel
Abstract: 
We analyze the impact of overconfidence on the timing of entry in markets, profits, and welfare using an extension of the quantity commitment game. Players have private information about costs, one player is overconfident, and the other one rational. We find that for slight levels of overconfidence and intermediate cost asymmetries, there is a unique cost-dependent equilibrium where the overconfident player has a higher ex-ante probability of being the Stackelberg leader. Overconfidence lowers the profit of the rational player but can increase that of the overconfident player. Consumer rents increase with overconfidence while producer rents decrease which leads to an ambiguous welfare effect.
Subjects: 
endogenous timing
entry
overconfidence
JEL: 
A12
C72
D43
D82
L10
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
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