CEO confidence bias and strategic choice: a general framework
An owner of a firm may choose to hire an unbiased CEO or one with confidence bias. We develop a model that demonstrates that the owner's optimal choice depends on whether the firm and rival choice variables are strategic substitutes or strategic complements. When choice variables are strategic...
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| Veröffentlicht in: | Journal of applied economics 2022-12, Vol.25 (1), p.731-740 |
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| container_end_page | 740 |
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| container_title | Journal of applied economics |
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| creator | Schroeder, Elizabeth Tremblay, Carol Horton Tremblay, Victor J. |
| description | An owner of a firm may choose to hire an unbiased CEO or one with confidence bias. We develop a model that demonstrates that the owner's optimal choice depends on whether the firm and rival choice variables are strategic substitutes or strategic complements. When choice variables are strategic substitutes or strategic complements for both firms, owners optimize by hiring overconfident CEOs. When choice variables are substitutes for one firm and complements for the rival firm, each firm optimizes by hiring an underconfident CEO. We show that the model applies to price and output competition, advertising, research and development spending, and product design. |
| doi_str_mv | 10.1080/15140326.2022.2053829 |
| format | Article |
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| ispartof | Journal of applied economics, 2022-12, Vol.25 (1), p.731-740 |
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| source | Taylor & Francis Open Access; DOAJ Directory of Open Access Journals; Elektronische Zeitschriftenbibliothek - Frei zugängliche E-Journals; Business Source Complete |
| subjects | Advertising Behavioral economics Bias Chief executive officers Chief executives Confidence confidence bias Economics Externality firm behavior Hiring managerial overconfidence Owners Product design Profits R&D Research & development Research & development expenditures strategic substitutes and complements Variables |
| title | CEO confidence bias and strategic choice: a general framework |
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