Overconfidence Increases Productivity

Abstract

Recent studies report that productivity increases under tournament reward structures than under piece rate reward structures. We conduct maze-solving experiments under both reward structures and reveal that overconfidence is a significant factor in increasing productivity. Specifically, subjects exhibiting progressively higher degrees of overconfidence solve more mazes. This result shows a positive aspect of overconfidence, which usually has been examined in its negative aspect as an expectation bias.

Keywords: expectation, overconfidence, reward structure, productivity, experiment

JEL Classification: C9, D03, J33