Evolutionary Justifications for Overconfidence

Kim Gannon, Hanzhe Zhang
2017 Social Science Research Network  
This paper provides evolutionary justifications for overconfidence. In each period, players are pairwise matched to fight for a resource and there is uncertainty about who wins the resource if they engage in the fight. Players have different confidence levels about their chance of winning although they actually have the same chance of winning in reality. Each player may know or may not know her opponent's confidence level. We characterize the evolutionarily stable equilibrium, represented by
more » ... yers' strategies and distribution of confidence levels. Furthermore, we characterize the evolutionary dynamics and the rate of convergence to the equilibrium. Under different informational environments, majority of players are overconfident, i.e. overestimate their chance of winning.
doi:10.2139/ssrn.3026885 fatcat:7rovsa3rnnfrlpxf7cfzm7feeq