Does overconfidence promote cooperation? Theory and experimental evidence

Abstract

This paper explores the potential “bright side” of overconfidence. We examine the effects of two types of overconfidence—overestimation and overprecision—on the contribution to the public good in a two-person threshold public good game. Experimental results show that the influence of overconfidence on contribution in public goods crucially depends on the agents’ type of preferences. Overestimation leads to a higher contribution by conditional cooperators, but a lower contribution by free-riders. Overprecision, in general, leads to a higher contribution by conditional cooperators, but has little effect on the contribution of free-riders.