Overconfidence and Social Signalling

Abstract

Evidence from both psychology and economics indicates that individuals give statements that appear to overestimate their ability compared to that of others. We test three theories that predict such relative overconfidence. The first theory argues that overconfidence can be generated by Bayesian updating from a common prior and truthful statements if individuals do not know their true type. The second theory suggests that self-image concerns asymmetrically affect the choice to receive new information about one's abilities, and this asymmetry can produce overconfidence. The third theory is that overconfidence is induced by the desire to send positive signals to others about one's own skill; this suggests either a bias in judgment, strategic lying, or both. We formulate this theory precisely. Using a large data set of relative ability judgments about two cognitive tests, we reject the restrictions imposed by the Bayesian model and also reject a key prediction of the self-image models that individuals with optimistic beliefs will be less likely to search for further information about their skill because this information might shatter their self-image. We provide evidence that personality traits strongly affect relative ability judgments in a pattern that is consistent with the third theory of social signaling. Our results together suggest that overconfidence in statements is more likely to be induced by social concerns than by either of the other two factors.

Deception and Self-Deception

“…Burks et al (2013) find a correlation between overconfidence on a cognitive test and a measure of social dominance in a sample of trainee truck drivers. They argue that the data are consistent with overconfidence as a social bias.…”

“…Thoma (2015) demonstrates that when others can observe their degree of overconfidence about task performance, men strategically deflate confidence in order to appear more likable. Note that Burks et al (2013) measure private beliefs, but don't vary the strategic context, whereas Charness et al (2013), Ewers and Zimmermann (2015) and Thoma (2015) vary the context of the interaction, but don't measure private beliefs. 1 Our study does both.…”

“…In the self-deception stage, we investigated whether the announcement of a profitable deception opportunity had an influence on beliefs about their own performance on an 3 While Benoît and Dubra (2011) show that overconfidence may result from a rational or Bayesian interpretation of available evidence, Burks et al (2013) demonstrates that not all aspects of overconfidence can be explained by such a model. 4 Note that our paper does not satisfy the criterion for self-deception posed in Gur and Sackeim (1979), as we do not show that subjects hold two contradicting beliefs at the same time.…”

Do women have more shame than men? An experiment on self-assessment and the shame of overestimating oneself

“…10 Each agent receives two tokens for every arithmetic problem she solves correctly. 11 Principals receive no payment for the real task. When adding the sets of numbers, however, subjects do not know their role and thus neither whether they will be paid for the real task.…”

Self-confidence and strategic behavior

“…Here we only mention that we cannot reject rational Bayesian updating using the Burks et al (2013) allocation function. This may reflect our having only two intervals, either above or below the median.…”