A growing body of evidence now shows that overconfidence provides important interpersonal benefits in strategic interactions. Building on this literature, we investigate whether overconfidence can emerge as a strategy in performance-based competition. More specifically, we test whether overconfident individuals can achieve higher payoffs than their well-calibrated counterparts by being more successful at deterring their opponents from entering the competition. In addition, we examine whether individuals are sophisticated about the malleability of their beliefs by engaging in motivated reasoning primarily when deterrence is possible. Finally, we study how the possibility to deter affects individuals’ information acquisition strategy.
Although altruistic behavior is well established, recent evidence suggests that it is only partly genuine, reflecting instead the desire to appear fair, either to themselves or to others.
In a lab experiment with 288 participants, we measured the extent of posturing and its relationship with other dimensions of social preferences. We implement a within-subject design that uses the different variations of the modified dictator game in Blanco et al. (2011) to elicit inequality concerns in Other-Other allocations and in Self-Other allocations in several cases: solely allocation (modified dictator game), under plausible deniability (moral wiggle room), and with the possibility to exert positive and negative reciprocity towards the allocator when in the role of the recipient. For the measurement of the moral wiggle room, our instrument allows not only to identify wrigglers, but also to convey an estimate of their posturing degree. In fact, departing from most of the tasks in the literature (based on the standard dictator game), our experimental protocol allows subjects to trade off their concern for money and reputational incentives at the margin without fully revealing their type.
More importantly, our design allows us to classify subjects along two dimensions: social image concern and deontological preferences. Once classified in this way, subjects show consistent, yet different, patterns of moral wiggle room and reciprocity. Overall, the use of the moral wiggle room is not prevalent. Only 38% of our subjects are less altruistic when their choice is hidden by the presence of a random draw than when it is fully observable. Interestingly those classified as Kantians (47% of our sample) are more prone to use the moral wiggle room than consequentialists (28%). While 37% of Kantians are moral wigglers, for consequentialists they represent only 29% of their group. Additionally, Kantians are more reciprocal in the intensive margin, but more likely to avoid punishing others. Moreover, non-reciprocal Kantians are often moral wrigglers.