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Title: Market Entry Decisions: Effects of Absolute and Relative Confidence
Authors: Bolger, Fergus
Pulford, Briony D.
Colman, Andrew M.
First Published: Apr-2008
Publisher: Hogrefe and Huber
Citation: Experimental Psychology, 2008, 55 (2), pp. 113-120
Abstract: In a market entry game, the number of entrants usually approaches game-theoretic equilibrium quickly, but in real-world markets business start-ups typically exceed market capacity, resulting in chronically high failure rates and suboptimal industry profits. Excessive entry has been attributed to overconfidence arising when expected payoffs depend partly on skill. In an experimental test of this hypothesis, 96 participants played 24 rounds of a market entry game, with expected payoffs dependent partly on skill on half the rounds, after their confidence was manipulated and measured. The results provide direct support for the hypothesis that high levels of confidence are largely responsible for excessive entry, and they suggest that absolute confidence, independent of interpersonal comparison, rather than confidence about one's abilities relative to others, drives excessive entry decisions when skill is involved.
DOI Link: 10.1027/1618-3169.55.2.113
ISSN: 1618-3169
Type: Article
Rights: This is the author's final draft of the paper published as Experimental Psychology, 2008, 55 (2), pp. 113-120. The final version is available from This article does not exactly replicate the final version published in the journal 'Experimental Psychology'. It is not a copy of the original published article and is not suitable for citation. Doi: 10.1027/1618-3169.55.2.113
Appears in Collections:Published Articles, School of Psychology

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