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Overconfidence and Preferences for Competition
Published: 02/13/2024 | DOI: 10.1111/jofi.13314
ERNESTO REUBEN, PAOLA SAPIENZA, LUIGI ZINGALES
We study when preferences for competition are a positive economic trait among high earners and the extent to which this trait can explain the gender gap in income among a master's degree in business administration (MBAs). Consistent with the experimental evidence, preferences for competition are a positive economic trait only for individuals who are not overconfident. Preferences for competition correlate with income only at graduation when bonuses are guaranteed and not a function of performance. Overconfident competition‐loving MBAs observe lower compensation and income growth, and experience greater exit from high‐reward industries and more frequent job interruptions. Preferences for competition do not explain the gender pay gap among MBAs.