Center for Behavioral Decision Research

CBDR : Seminar Series : Seminar by Natalia Karelaia

Risk Taking and Excess Entry: The Roles of Confidence and Fallible Judgment

	presented by Natalia Karelaia (University of Lausanne)


	Friday, December 14	link to paper
	Noon-1:30
	Porter 223D	link to Speaker's Site

	Abstract:

	Economic explanations for the high failure rate of entrepreneurial ventures suggest “hit and run” entrants and risk-seeking behavior. A psychological explanation is overconfidence. We show analytically that excess entry follows inevitably from entrepreneurs relying on imperfect-but not necessarily overconfident-assessments of their ability, and, by the same token, that many fail to enter businesses they should have entered. We further investigate the relation between overconfidence (defined in both absolute and relative terms) and attitudes toward risk in two experiments designed to mimic entry decisions. Although perhaps not overconfident, entrepreneurs could gain much by assessing their abilities more accurately.

	Host at CMU: Morewedge