Abstract
The 2005 paper “Overconfident: Do you put your money on it?” by Eric Hoelzl and Aldo Rustichini introduces a novel approach to studying of overconfidence in comparison to others. By letting participants vote for a performance test or a lottery as the basis for a bonus payment, they present a behavioral measure for relative overconfidence that goes beyond verbal performance self-assessments. They observe a tendency for underconfident assessments under monetary incentives with hard test items, i.e. individuals increasingly opting for a luck-based payment scheme (die roll) over the performance-based one (knowledge test), presumably due to individuals perceiving their chances to be higher in a fair 50/50 lottery than in a (difficult) performance test.
More recent literature has noted that the observed voting patterns do not necessarily constitute underconfidence but may rather be attributed to attitudes of aversion against risk or ambiguity associated with the test (Grieco & Hogarth 2009, Blavatskyy 2008, Owens et al. 2014). We further argue that the two payment schemes are not perfectly comparable in terms of perceived winning probability, as the test presents a fixed winner distribution of 50% (i.e. no variance in the amount of winners), while the lottery presents a probabilistic winner distribution with a variance to it. This inherent variance may bias the voters’ perception of their probability to win and may even lead to altruistic behavior in the sense that “everybody has the chance to win on an individual die roll”, in which the chance of winning is not interdependent with other participants performance. For these reasons, we suspect that the voting share in favor of the lottery that is due to underconfidence may be overestimated.
Therefore, in the planned experiment, a fixed outcome distribution lottery (50/50) will be compared against the probabilistic 50/50 lottery from Hoelzl & Rustichini (2005) in a between-subject design to evaluate the impact of the lottery mechanism’s design on individual voting behavior. Additional questionnaire measures will be implemented to gain a more complete understanding of the driving motive(s) behind individual voting behavior to either rebut or affirm alternative explanations besides underconfidence.