The attraction of uncertainty: Interactions between skill and levels of uncertainty in market-entry games

The experimental market entry paradigm has been used to illuminate the role of self-assessed skill in risk taking. Specifically, success only accompanies entry if a participant is one of the better ranked entrants on the skill criterion. We investigate what happens when participants face an additional source of uncertainty that perturbs relative skill rankings. Interestingly, this has asymmetric effects. On average, chances of success are increased for those with low rankings but decreased for those with high rankings. Thus, we predicted that the additional uncertainty would lead to more entry by the former but less by the latter. Our data supported the first prediction but, for those with high skill rankings, the existence of additional uncertainty made little difference. Finally, although we observed “excess entry” (i.e., too many participants entered markets), this could not be attributed to overconfidence. We conclude by contrasting our results with others in the literature.