Overconfidence and Preferences for Competition

48 Pages Posted: 9 Nov 2015 Last revised: 3 Jun 2023

See all articles by Ernesto Reuben

Ernesto Reuben

New York University (NYU) - New York University, Abu Dhabi; IZA Institute of Labor Economics

Paola Sapienza

Northwestern University - Kellogg School of Management - Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Luigi Zingales

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

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Date Written: November 2015

Abstract

We study whether and when preferences for competition are a positive economic trait among high-earners and to what extent this trait can explain the gender gap in income among MBAs. Consistent with the experimental evidence, preferences for competition are a positive economic trait only for non-overconfident individuals. Preferences for competition correlate with income only at graduation when bonuses are guaranteed and not a function of performance. Overconfident, competition loving MBAs have lower compensation and income growth, and experience greater exit from high-reward industries and more frequent job interruptions. Preferences for competition do not explain the gender pay gap among MBAs.

Suggested Citation

Reuben, Ernesto and Sapienza, Paola and Zingales, Luigi, Overconfidence and Preferences for Competition (November 2015). NBER Working Paper No. w21695, Available at SSRN: https://ssrn.com/abstract=2687843

Ernesto Reuben (Contact Author)

New York University (NYU) - New York University, Abu Dhabi ( email )

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Abu Dhabi
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IZA Institute of Labor Economics

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Paola Sapienza

Northwestern University - Kellogg School of Management - Department of Finance ( email )

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National Bureau of Economic Research (NBER)

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Luigi Zingales

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National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

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Belgium

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