Many "real-world" situations can be characterized as a rank order tournament. In other words, prizes are not proportional to outcomes, but accrue to the top performers. In many employment situations, only the best performers are promoted - for example tenure in academia, or promotion to partner in a consulting or law firms. In such situations, overconfidence bias may:
* [Cause employees to p]refer tournaments and other compensation schemes where most of the rewards are concentrated at the top, and where the costs of failure are extreme (for example an "up or out" promotion system). The overconfidence bias causes these employees to consider the chance that they will fail to be very slim and to overestimatethe chance that they will succeed.