Gender robustness of overconfidence and excess entry

Katarína Danková, Maroš Servátka

Research output: Contribution to journalArticleResearchpeer-review

Abstract

Camerer and Lovallo (1999; henceforth CL) present thought-provoking experimental evidence that overconfidence might lead to excess entry into markets. As their findings are based on the majority of sessions exclusively consisting of male participants, we conduct two experiments in an attempt to replicate their study while including both men and women in all of our sessions. Our Experiment 1 closely follows CL's design whereas Experiment 2 employs a gender-neutral addition task and provides more control in assessing gender differences in overconfidence and excess entry. Using participants of both genders we are unable to replicate CL's main finding that market entry decisions are driven by overconfidence. Contrary to CL, where self-selection increases the entry rate, in our Experiment 1 self-selection leads to less entry. This result is driven by self-selected females who rationally enter the market less often than self-selected males as their rank-determining performance on a sports and current events trivia quiz is weaker than the performance of self-selected males. In Experiment 2 we find no effect of self-selection on entry and no gender differences in entry rates or performance in the addition task. Our results point out that (i) the finding that overconfidence leads to excess entry is not robust to a population consisting of both genders; and (ii) the self-selection effect is sensitive to both gender and task that is used to determine the rank upon entry.

LanguageEnglish
Pages179-199
Number of pages21
JournalJournal of Economic Psychology
Volume72
DOIs
Publication statusPublished - 1 Jun 2019

Fingerprint

experiment
gender
gender-specific factors
Sports
performance
opening up of markets
quiz
market
Population
Overconfidence
Robustness
Excess entry
Experiment
Self-selection
event
evidence
Gender differences
Selection effects
Market entry
Experiment design

Keywords

  • Experiment
  • Gender
  • Market entry
  • Overconfidence
  • Real Effort
  • Replication
  • Robustness
  • Self-selection

Cite this

@article{8b401d90a22e4b4e8bf3c75237cc8832,
title = "Gender robustness of overconfidence and excess entry",
abstract = "Camerer and Lovallo (1999; henceforth CL) present thought-provoking experimental evidence that overconfidence might lead to excess entry into markets. As their findings are based on the majority of sessions exclusively consisting of male participants, we conduct two experiments in an attempt to replicate their study while including both men and women in all of our sessions. Our Experiment 1 closely follows CL's design whereas Experiment 2 employs a gender-neutral addition task and provides more control in assessing gender differences in overconfidence and excess entry. Using participants of both genders we are unable to replicate CL's main finding that market entry decisions are driven by overconfidence. Contrary to CL, where self-selection increases the entry rate, in our Experiment 1 self-selection leads to less entry. This result is driven by self-selected females who rationally enter the market less often than self-selected males as their rank-determining performance on a sports and current events trivia quiz is weaker than the performance of self-selected males. In Experiment 2 we find no effect of self-selection on entry and no gender differences in entry rates or performance in the addition task. Our results point out that (i) the finding that overconfidence leads to excess entry is not robust to a population consisting of both genders; and (ii) the self-selection effect is sensitive to both gender and task that is used to determine the rank upon entry.",
keywords = "Experiment, Gender, Market entry, Overconfidence, Real Effort, Replication, Robustness, Self-selection",
author = "Katar{\'i}na Dankov{\'a} and Maroš Serv{\'a}tka",
year = "2019",
month = "6",
day = "1",
doi = "10.1016/j.joep.2019.03.006",
language = "English",
volume = "72",
pages = "179--199",
journal = "Journal of Economic Psychology",
issn = "0167-4870",
publisher = "Elsevier",

}

Gender robustness of overconfidence and excess entry. / Danková, Katarína; Servátka, Maroš.

In: Journal of Economic Psychology, Vol. 72, 01.06.2019, p. 179-199.

Research output: Contribution to journalArticleResearchpeer-review

TY - JOUR

T1 - Gender robustness of overconfidence and excess entry

AU - Danková, Katarína

AU - Servátka, Maroš

PY - 2019/6/1

Y1 - 2019/6/1

N2 - Camerer and Lovallo (1999; henceforth CL) present thought-provoking experimental evidence that overconfidence might lead to excess entry into markets. As their findings are based on the majority of sessions exclusively consisting of male participants, we conduct two experiments in an attempt to replicate their study while including both men and women in all of our sessions. Our Experiment 1 closely follows CL's design whereas Experiment 2 employs a gender-neutral addition task and provides more control in assessing gender differences in overconfidence and excess entry. Using participants of both genders we are unable to replicate CL's main finding that market entry decisions are driven by overconfidence. Contrary to CL, where self-selection increases the entry rate, in our Experiment 1 self-selection leads to less entry. This result is driven by self-selected females who rationally enter the market less often than self-selected males as their rank-determining performance on a sports and current events trivia quiz is weaker than the performance of self-selected males. In Experiment 2 we find no effect of self-selection on entry and no gender differences in entry rates or performance in the addition task. Our results point out that (i) the finding that overconfidence leads to excess entry is not robust to a population consisting of both genders; and (ii) the self-selection effect is sensitive to both gender and task that is used to determine the rank upon entry.

AB - Camerer and Lovallo (1999; henceforth CL) present thought-provoking experimental evidence that overconfidence might lead to excess entry into markets. As their findings are based on the majority of sessions exclusively consisting of male participants, we conduct two experiments in an attempt to replicate their study while including both men and women in all of our sessions. Our Experiment 1 closely follows CL's design whereas Experiment 2 employs a gender-neutral addition task and provides more control in assessing gender differences in overconfidence and excess entry. Using participants of both genders we are unable to replicate CL's main finding that market entry decisions are driven by overconfidence. Contrary to CL, where self-selection increases the entry rate, in our Experiment 1 self-selection leads to less entry. This result is driven by self-selected females who rationally enter the market less often than self-selected males as their rank-determining performance on a sports and current events trivia quiz is weaker than the performance of self-selected males. In Experiment 2 we find no effect of self-selection on entry and no gender differences in entry rates or performance in the addition task. Our results point out that (i) the finding that overconfidence leads to excess entry is not robust to a population consisting of both genders; and (ii) the self-selection effect is sensitive to both gender and task that is used to determine the rank upon entry.

KW - Experiment

KW - Gender

KW - Market entry

KW - Overconfidence

KW - Real Effort

KW - Replication

KW - Robustness

KW - Self-selection

UR - http://www.scopus.com/inward/record.url?scp=85063917327&partnerID=8YFLogxK

U2 - 10.1016/j.joep.2019.03.006

DO - 10.1016/j.joep.2019.03.006

M3 - Article

VL - 72

SP - 179

EP - 199

JO - Journal of Economic Psychology

T2 - Journal of Economic Psychology

JF - Journal of Economic Psychology

SN - 0167-4870

ER -