Overconfidence, Dishonesty and Economic Behavior

This thesis consists of three studies on economic behavior. The first two studies analyze the impact overconfidence on market outcomes and effort provision whereas the last one focuses on the impact of dishonesty on individual decision making. The first chapter uses a laboratory experiment to study the causal impact of self-confidence on bargaining with joint production. Self-confidence is exogenously manipulated by the means of an easy or a hard task. Relative performance in such task generates the joint surplus. The results of this chapter show that, when the joint surplus is low, overconfidence leads to bargaining failures, whereas most people settle on an equal split when the joint surplus is high. The second chapter analyses theoretically the impact of overconfidence on effort provision in an asymmetric tournament with heterogeneous agents. When overconfidence is small, the effort provision of an overconfident agent increases, whereas the effort provision of an unbiased agent decreases; when overconfidence is large, the effort provision of all agents decreases, compared to a symmetric equilibrium with unbiased workers. For a given prize spread, a firm is better off when overconfidence is small since profits are higher on average. The third chapter studies experimentally the determinants of lying behavior in absence of strategic interactions. In this context, it is shown that observing lying increases lying. The chapter also suggests that those who expect others to be truthful but observe lying, lie more than those who expect others to be truthful and observe truth telling. Yet, it is not the case that those who expect others to lie but observe truth telling lie less than those who expect lying and observe lying