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POSITIVE SELF‐IMAGE IN TOURNAMENTS *
Author(s) -
SantosPinto Luís
Publication year - 2010
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/j.1468-2354.2010.00589.x
Subject(s) - productivity , incentive , welfare , tournament , variety (cybernetics) , self image , economics , microeconomics , image (mathematics) , contrast (vision) , labour economics , psychology , social psychology , computer science , artificial intelligence , mathematics , combinatorics , market economy , macroeconomics
This article analyzes the implications of worker overestimation of productivity for firms in which incentives take the form of tournaments. Each worker overestimates his productivity but is aware of the bias in his opponent's self‐assessment. The manager of the firm, on the other hand, correctly assesses workers' productivities and self‐beliefs when setting tournament prizes. The article shows that, under a variety of circumstances, firms can benefit from worker positive self‐image. The article also shows that worker positive self‐image can improve welfare in tournaments. In contrast, workers' utility declines due to their own misguided choices.