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Games
Special Issues
Impact of Overconfidence and Optimism on Individual Decisions
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Impact of Overconfidence and Optimism on Individual Decisions

A special issue of Games (ISSN 2073-4336).

Deadline for manuscript submissions: closed (18 September 2020) | Viewed by 14803

Special Issue Editor

Prof. Dr. Luís Santos-Pinto

E-Mail Website
Guest Editor
Department of Economics, University of Lausanne, Lausanne, Switzerland
Interests: behavioral economics; experimental economics; labor economics; overconfidence; optimism; decision-making; incentives

Special Issue Information

Dear Colleagues,

Humans display overconfidence and optimism in a large variety of economically relevant situations. A growing literature in experimental economics shows overconfidence and optimism influence individual and strategic decision-making. On the theory side, the focus has been on explaining why humans display these biases, on determining their costs and benefits, and their impact on market and nonmarket interactions. This Special Issue of Games seeks experimental and theoretical contributions on overconfidence and optimism. 

The list of keywords included below identifies some of the suitable topics, but it is not exhaustive. For this Special Issue we are particularly interested in understanding how overconfidence and optimism evolve over time, how they persist after repeated feedback, their role on individual decision-making, their partial and general equilibrium effects, and their impact on strategic interactions such as market entry, bargaining, contracting, tournaments, and teamwork.

Prof. Luís Santos-Pinto
Guest Editor

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Games is an international peer-reviewed open access semimonthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1600 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • overconfidence
  • optimism
  • incentives
  • contracts
  • firms
  • consumers
  • workers
  • partial equilibrium
  • general equilibrium
  • laboratory experiments

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Published Papers (3 papers)

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Research

19 pages, 327 KiB  
Article
Human Capital Accumulation and the Evolution of Overconfidence
by Luis Santos-Pinto
Games 2020, 11(4), 46; https://doi.org/10.3390/g11040046 - 22 Oct 2020
Cited by 1 | Viewed by 2549
Abstract
This paper studies the evolution of overconfidence over a cohort’s working life. To do this, the paper incorporates subjective assessments into a continuous time human capital accumulation model with a finite horizon. The main finding is that the processes of human capital accumulation, [...] Read more.
This paper studies the evolution of overconfidence over a cohort’s working life. To do this, the paper incorporates subjective assessments into a continuous time human capital accumulation model with a finite horizon. The main finding is that the processes of human capital accumulation, skill depreciation, and subjective assessments imply that overconfidence first increases and then decreases over the cohort’s working life. In the absence of skill depreciation, overconfidence monotonically increases over the cohort’s working life. The model generates four additional testable predictions. First, everything else equal, overconfidence peaks earlier in activities where skill depreciation is higher. Second, overconfidence is lower in activities where the distribution of income is more dispersed. Third, for a minority of individuals, overconfidence decreases over their working life. Fourth, overconfidence is lower with a higher market discount rate. The paper provides two applications of the model. It shows the model can help make sense of field data on overconfidence, experience, and trading activity in financial markets. The model can also explain experimental data on the evolution of overconfidence among poker and chess players. Full article
(This article belongs to the Special Issue Impact of Overconfidence and Optimism on Individual Decisions)
19 pages, 420 KiB  
Article
Overconfidence and Timing of Entry
by Luis Santos-Pinto and Tiago Pires
Games 2020, 11(4), 44; https://doi.org/10.3390/g11040044 - 12 Oct 2020
Cited by 1 | Viewed by 2310
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 [...] Read more.
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. Full article
(This article belongs to the Special Issue Impact of Overconfidence and Optimism on Individual Decisions)
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15 pages, 528 KiB  
Article
Optimism Bias during the Covid-19 Pandemic: Empirical Evidence from Romania and Italy
by Elena Druică, Fabio Musso and Rodica Ianole-Călin
Games 2020, 11(3), 39; https://doi.org/10.3390/g11030039 - 17 Sep 2020
Cited by 46 | Viewed by 9281
Abstract
Given the importance of perceived susceptibility to a disease in adopting preventive behaviors, and the negative impact of optimism bias on prevention, this paper aimed to explore to what extent comparative optimism bias (understood as the tendency to assess a lower probability for [...] Read more.
Given the importance of perceived susceptibility to a disease in adopting preventive behaviors, and the negative impact of optimism bias on prevention, this paper aimed to explore to what extent comparative optimism bias (understood as the tendency to assess a lower probability for oneself to experience negative health events compared to others) is present in the specific context of the Covid-19 pandemic, in two countries with different profiles in terms of the spread of the disease: Italy and Romania. After identifying optimism bias in both countries, we tested whether it depends on respondents’ characteristics like gender, age, education, health status and whether or not they have the opportunity to work from home. We surveyed 1126 Romanians and 742 Italians, and found that optimism bias depends on self-reported health status, and that optimism bias increases with age. Inconclusive evidences were found regarding gender and education level, as well as the option to work from home. Full article
(This article belongs to the Special Issue Impact of Overconfidence and Optimism on Individual Decisions)
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