Job Market Paper: Self-Esteem and Rational Self-Handicapping

Abstract: In order to protect their self-esteem, agents may create or seek out performance-inhibiting obstacles to avoid negative feedback about their ability. This behavior allows agents to attribute failures to self-imposed obstacles rather than to a lack of competence. Psychologists refer to this phenomenon as self-handicapping. In this paper, I model rational agents with preferences for self-esteem. This allows me to provide sufficient conditions under which these self-esteem concerned agents engage in rational self-handicapping behavior. I then consider the effects of self-esteem concerned agents in two policy relevant applications: education and tournaments. In education, designing an exam with noisier questions results in more studying by self-handicappers without discouraging other students. In tournaments, policies aimed at encouraging a particular group to show up to job interviews can result in strategic adjustment by the targeted group leading to their lower overall attendance.