Camerer & Lovallo 1999 — excess entry driven by overconfidence about RELATIVE skill
Summary
Claim: Camerer & Lovallo (1999, American Economic Review, "Overconfidence and Excess Entry") demonstrated experimentally that excess market entry is driven by overconfidence about relative skill, and that entry was highest when participants knew success depended on skill and self-selected in — "reference-group neglect": entrants ignore that competitors also self-selected.
Source: Camerer & Lovallo 1999, AER. Experimental.
Confidence: Verified.
Why this matters for Candid: Most SMB owners who use the widget are already self-selected entrants. The bias is structural: they will under-weight competitors who also chose to enter. The widget's competitor-counting tasks (CAN — "Search your main service + city. How many businesses appear above you?" (live counting task)) directly attack this by making the competitor pool visible and concrete.
Related entries
Referenced by (3)
- reference Research brief: SMB widget capture layer — what owners can vs cannot self-report (June 2026) relates-to
- reference Cain, Moore & Haran 2015 — OVERPLACEMENT (not absolute confidence) drives entry; easy markets pull entrants in relates-to
- reference CANNOT — "How do you compare to your competitors?" (abstract → max overplacement) depends-on