Inequity Aversion, Overconfidence, and Group Performance

This thesis theoretically investigates the impact of inequity aversion and overconfidence on group performance. The studies presented concentrate on two main topics: First, we investigate the private provision of public goods when agents are motivated by fairness concerns in terms of inequity aversion. Second, we study the consequences of overly optimistic self-perception for the allocation of tasks and the incentives for cooperation in teams. All studies are common regarding three features: First, they all focus on situations in which economically efficient effort choices and contribution levels are not contracted such that incentives for free-riding behavior may exist. Second, both in the public goods and in the team production settings the group outcome is always fully and equally shared by all group members. Finally, both inequity aversion and overconfidence can help to mitigate the negative impact of the free-rider problem leading to more efficient outcomes, even without having to implement the optimal incentive contracts.