Anticipatory effects of competition on confidence and risk preference

Abstract

We study anticipatory changes in confidence and risk preference aroused by the prospect of future competition. Participants in our treatment group are told they will later participate in a tournament, while those in the control group are told they will work for a piece rate. Beliefs over relative ability and risk attitudes are measured prior to this prospective task. We find no anticipatory effect on confidence in relative ability, but a significant effect on risk preference. Specifically, the treatment increases risk aversion in males, but not in females, such that the conventional gender difference in risk preference is neutralized.