Time-sensitive self-confidence and competition entry

Empirical evidence suggests that people's beliefs about themselves and their future prospects often become more pessimistic when the resolution of truth is imminent (see Sweeny and Krizan (2013) for a review). For instance, Krizan and Sweeny (2013) show that voters lower their expectations about the chances of their preferred outcome as the Election Day approaches. In a related vein, Taylor and Sheppard (1998) document that subjects lower their predictions for a medical condition with severe consequences when they will learn the result of this testing in the near future.

We study the impact of expectations about the timing of uncertainty resolution on beliefs about exam grades. We departure from previous experiments by implementing the following design features. First, we elicit beliefs in an incentive compatible manner such that any belief distortion is costly in terms of expected payoffs. Second, we exogenously manipulate expectations about the timing of uncertainty resolution while holding the timing of belief elicitations constant. Third, we investigate how the manipulated confidence level of beliefs about exam grades influences the willingness to select into a competitive payment scheme for performance in the exam. We hypothesize that beliefs about exam grades become more pessimistic when individuals expect the immediate resolution of uncertainty, resulting in a lower propensity to enter a competitive environment.