The Relationship Between Overconfidence and the Introduction of Risky Products: Evidence From a Field Study.

Confidence Calibration in a Multi-year Geopolitical Forecasting Competition

“…The few longitudinal studies suffer from sporadic sampling and relatively few judgments (Ben-David et al 2013, Dunlosky and Rawson 2012, Simon and Houghton 2003. In the current study, we examine probabilistic forecasts of important events over a period of three years.…”

Project managers’ overconfidence: how is risk reflected in anticipated project success?

“…Overconfidence also relates positively to the degree of risk linked to a product introduction in the way that decision makers who decide on riskier new product introductions exhibit higher degrees of overconfidence (Simon and Houghton 2003). Similarly, Li and Tang (2010) find that risk taking of a company relates positively to the CEO's overconfidence, leading CEOs to overpay for target companies and to undertake value-destroying mergers (Malmendier and Tate 2008) After we now introduced the research background of our study, we will, based on already identified research gaps and research questions, develop our hypotheses in the following section.…”

“…These risk assessments may, in addition, be affected by overconfident judgments, as people are often unaware of the limited accuracy of their judgments and tend to express overly high levels of confidence in their ability to make accurate estimates (Moore and Healy 2008). This bias is referred to as overconfidence and has been found to lead to risky behavior in various business settings such as entrepreneurial decision making (Hayward et al 2006), investment decisions (Nosić and Weber 2010), or new product development (Simon and Houghton 2003). While the literature shows that overconfidence may promote risk taking, it remains unclear what links overconfidence to risky behavior.…”

“…While earlier research mostly links overconfidence directly to risky behavior (Li and Tang 2010;Nosić and Weber 2010;Simon and Houghton 2003), decision theory suggests that people must first engage in a decision-making process in which they assess potential risks and subsequently choose their behavior (Glöckner and Betsch 2008;Tversky and Kahneman 1992). In the following, we investigate how overconfidence may reduce risk awareness and lead to an overly optimistic risk assessment.…”

“…Additionally, risks seem to be insufficiently reflected in project managers' anticipated project success. Thus, our study offers the following contributions: Firstly, the present study considers the process through which overconfidence may lead to risky behavior, while earlier research mostly links overconfidence directly to risky behavior (Li and Tang 2010;Nosić and Weber 2010;Simon and Houghton 2003): Overconfidence leads to a lower perceived threat of risks (i.e., lower risk awareness), which in turn influences project managers' risk assessment. Secondly, risks are insufficiently considered in anticipated project success: Only the estimated likelihood of a risk occurring has an influence on a project manager's assessment of project success; the estimated impacts of these risks are neglected.…”