Generative AI and Overconfidence in Market Entry

The intervention in this study involves providing participants with the opportunity to use generative AI tools during a creative writing task. Specifically, participants in the experimental group are given access to AI assistance, which helps them generate ideas, refine their concepts, and improve their written descriptions of a new product or service. In contrast, participants in the control group perform the same task independently without the aid of AI. The intervention aims to assess whether the use of AI influences participants' decision-making behavior, specifically their likelihood of entering market competition, the frequency with which they enter, their choice of team size, and potential overconfidence in their market strategies. By comparing the control and experimental groups, the study seeks to understand how AI assistance might impact creativity, decision-making, and the formation of overconfidence in competitive scenarios.

2025-04-13

2025-04-30

The key outcome variables (endpoints) of interest in this experiment are as follows:

Likelihood of Market Entry: Whether participants choose to enter the market competition in each round (binary outcome: 1 = Enter, 0 = Do not enter). This measures the impact of AI assistance on the decision to engage in the market.

Frequency of Market Entry: The total number of rounds in which participants choose to enter the market throughout the entire competition phase. This continuous measure reflects the extent to which AI influences participants' engagement in market competition.

Team Size Decision: The number of team members participants select when they opt to enter the market, ranging from 1 to 10 (including themselves). This measure evaluates whether AI-assisted participants are more likely to form smaller teams.

Overconfidence Indicator: The degree to which participants exhibit overconfidence, as indicated by the difference between their predicted team size and the actual size they choose. This measures how AI influences participants' confidence in selecting smaller teams, potentially underestimating the number of team members required for market success.

Experimental Design
This study uses a between-subjects design with two groups: a Control Group and an Experimental Group.

Control Group: Participants complete a creative writing task independently without AI assistance.

Experimental Group: Participants use generative AI tools to help with their creative writing task.

Task: Participants are asked to conceptualize a new product or service, describing its functionality, purpose, impact, and motivation. They have 25 minutes to complete this task.

Afterward, participants enter a market competition phase, where they make decisions about whether to enter the market and team size (1 to 10 members, including themselves) for each round of competition.

Outcomes:

Whether participants decide to enter the market.

The frequency of market entries.

The size of teams chosen by participants.

Overconfidence, as indicated by the gap between predicted and actual team size selection.

The experiment explores how AI assistance influences market entry decisions, team size choices, and the potential for overconfidence in decision-making.

Experimental Design
This experiment employs a between-subjects design with two groups: a Control Group and an Experimental Group. The primary aim is to investigate whether the use of generative AI tools during a creative writing task influences participants' decision-making in a competitive market environment.

Participants:
Participants will be randomly assigned to one of two groups:

Control Group: Participants in this group will complete the creative writing task without the aid of AI. They will independently conceptualize and describe a new product or service and later make decisions regarding market entry and team formation.

Experimental Group: Participants in this group will be provided with access to generative AI tools to assist them in the creative writing task. They will use the AI to generate ideas and refine their product or service concept.

Task:
The creative writing task involves conceptualizing a new product or service, addressing the following aspects:

Functionality of the product/service

The problem or need it addresses

Its potential impact (e.g., convenience, sustainability, efficiency)

The motivation or inspiration for creating it

Participants are given 25 minutes to complete this task, with the final product being used to determine their performance in subsequent market competition rounds.

Market Competition:
After completing the task, participants will move to a competitive decision-making phase. In this phase:

They will decide whether to enter the market each round (with a binary decision: enter or not enter).

If they choose to enter, they will decide the size of their team (ranging from 1 to 10 people, including themselves).

The market competition is designed to simulate a competitive environment, with participants being ranked based on their task performance. Their reward is determined by their market entry decisions and team composition. The reward structure changes across rounds, with different market capacity settings (e.g., 2, 4, 6, 8) that influence the distribution of rewards.

Outcomes:
The primary outcomes of interest are:

Likelihood of Market Entry: Whether a participant chooses to enter the market in each round (binary).

Frequency of Market Entry: The total number of rounds a participant enters the market.

Team Size Decision: The number of people chosen by the participant when entering the market.

Overconfidence Indicator: The difference between a participant’s predicted ideal team size and the actual team size they choose, which may reflect overconfidence in their market strategy.

Hypotheses:
AI-assisted participants are more likely to enter the market compared to the control group.

AI-assisted participants will enter the market more frequently, possibly due to overconfidence in their abilities.

AI-assisted participants are more likely to form smaller teams when entering the market.

AI-assisted participants, due to overconfidence, may believe that a smaller team is sufficient for success, leading to frequent entries with smaller teams.

randomization done in office by a computer,

individual

No

1 university

100-150 university students

50 students control, 50 students treatment