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Wiley InterScience | |||||||||||||||||||
  Journal of Economics & Management StrategyVolume 10 Issue 3, Pages 301 - 330 Published Online: 28 Jan 2004 © 2010 Wiley Periodicals, Inc.
Abstract | References | Full Text: PDF (Size: 210K) | Related Articles | Citation Tracking  On the Evolution of Overconfidence and Entrepreneurs Copyright © 2001 Massachusetts Institute of Technology ABSTRACTThis paper explains why seemingly irrational overconfident behavior can persist. Information aggregation is poor in groups in which most individuals herd. By ignoring the herd, the actions of overconfident individuals ("entrepreneurs") convey their private information. However, entrepreneurs make mistakes and thus die more frequently. The socially optimal proportion of entrepreneurs trades off the positive information externality against high attrition rates of entrepreneurs, and depends on the size of the group, on the degree of overconfidence, and on the accuracy of individuals' private information. The stationary distribution trades off the fitness of the group against the fitness of overconfident individuals. | 
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