Overconfident: Do You Put Your Money on It?

Abstract

A group exhibits overconfidence if significantly more than half the group members declare to be better than the median in some characteristic. Overconfidence was found in verbal reports for a variety of characteristics and settings but was less often studied for choice behaviour. In an experiment we tested how perceived relative skill influences verbal and choice behaviour. Treatments varied task difficulty and payment. Choice behaviour changes from overconfidence to underconfidence when the task changes from easy and familiar to non-familiar. This effect is significant when monetary payments are at stake and weak when they are not.

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

“…Empirical evidence often suggests that people tend to overestimate their abilities, yet, overconfidence seems to depend on the task, the incentives, and the techniques to elicit self-confidence. 26 To address the issue of overestimation, we next consider the average "accuracy" of the agents' guessed ranks. A meaningful measure of accuracy should take account of the fact that the group of 21 participants in the baseline treatment -which determines a subject's 'actual rank' in the experiment -is relatively small and might contain outliers.…”

When overconfidence is revealed to others: Testing the status-enhancement theory of overconfidence

“…For example, many people overestimate the superiority of their work performance (Cross, 1977;Haun, Zeringue, Leach, & Foley, 2000;Zenger, 1992), social skills (College Board, 1976-1977Lewinsohn, Mischel, Chaplin, & Barton, 1980;Swann & Gill, 1997), and physical talents (Dunning, Meyerowitz, & Holzberg, 1989;Svenson, 1981; for exceptions, see Kruger, 1999;Moore, 2007). Such overconfidence persists even when the stakes are high and individuals have incentives to estimate their relative abilities accurately (Ehrlinger, Johnson, Banner, Dunning, & Kruger, 2008;Hoelzl & Rustichini, 2005;Williams & Gilovich, 2008).…”

Market Entry Decisions

“…It is intuitive to suppose that absolute confidence will be elevated after answering a set of easy questions and lowered after answering a set of hard questions -there is some evidence supporting this intuition (e.g., Gigerenzer, Hoffrage, & Kleinbölting, 1991;Stankov, 2000). Similarly, with regard to relative confidence, research on the worsethan-average effect has shown that people commonly judge their performance to be better than average on easy tasks but worse than average on hard ones (Hoelzl & Rustichini, 2005;Moore & Kim, 2003;Windschitl, Kruger, & Simms, 2003). For these reasons we decided to use task difficulty as a means of manipulating confidence.…”