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22 septembre 2020
- handle: 10670/1.r7usyw
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Mots-clés
Endogenous Timing, Entry, OverconfidenceSujets proches
Net income Probability Statistical inference Public markets Balancing (Physics) Balance (Physics) Balance Expenses Costs (Economics) divertissement jeuxCiter ce document
Luis Santos Pinto et al., « Overconfidence and Timing of Entry », Serveur académique Lausannois, ID : 10670/1.r7usyw
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Résumé
We analyze the impact of overconfidence on the timing of entry in markets, profits, and welfare using an extension of Hamilton and Slutsky’s (1990) 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.