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Power and overconfident decision-making

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  • Fast, Nathanael J.
  • Sivanathan, Niro
  • Mayer, Nicole D.
  • Galinsky, Adam D.
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    Abstract

    Five experiments demonstrate that experiencing power leads to overconfident decision-making. Using multiple instantiations of power, including an episodic recall task (Experiments 1–3), a measure of work-related power (Experiment 4), and assignment to high- and low-power roles (Experiment 5), power produced overconfident decisions that generated monetary losses for the powerful. The current findings, through both mediation and moderation, also highlight the central role that the sense of power plays in producing these decision-making tendencies. First, sense of power, but not mood, mediated the link between power and overconfidence (Experiment 3). Second, the link between power and overconfidence was severed when access to power was not salient to the powerful (Experiment 4) and when the powerful were made to feel personally incompetent in their domain of power (Experiment 5). These findings indicate that only when objective power leads people to feel subjectively powerful does it produce overconfident decision-making.

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    Bibliographic Info

    Article provided by Elsevier in its journal Organizational Behavior and Human Decision Processes.

    Volume (Year): 117 (2012)
    Issue (Month): 2 ()
    Pages: 249-260

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    Handle: RePEc:eee:jobhdp:v:117:y:2012:i:2:p:249-260

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    Web page: http://www.elsevier.com/locate/obhdp

    Related research

    Keywords: Power; Overconfidence; Overprecision; Decision-making; Positive illusions; Hubris; Sense of power;

    References

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    1. Klayman, Joshua & Soll, Jack B. & Gonzalez-Vallejo, Claudia & Barlas, Sema, 1999. "Overconfidence: It Depends on How, What, and Whom You Ask, , , , , , , , ," Organizational Behavior and Human Decision Processes, Elsevier, vol. 79(3), pages 216-247, September.
    2. Malmendier, Ulrike M. & Tate, Geoffrey, 2003. "Who Makes Acquisitions? CEO Overconfidence and the Market's Reaction," Research Papers 1798, Stanford University, Graduate School of Business.
    3. Ulrike Malmendier & Geoffrey Tate, 2004. "CEO Overconfidence and Corporate Investment," NBER Working Papers 10807, National Bureau of Economic Research, Inc.
    4. Klar, Yechiel & Medding, Aviva & Sarel, Dan, 1996. "Nonunique Invulnerability: Singular versus Distributional Probabilities and Unrealistic Optimism in Comparative Risk Judgments," Organizational Behavior and Human Decision Processes, Elsevier, vol. 67(2), pages 229-245, August.
    5. Moore, Don A. & Cain, Daylian M., 2007. "Overconfidence and underconfidence: When and why people underestimate (and overestimate) the competition," Organizational Behavior and Human Decision Processes, Elsevier, vol. 103(2), pages 197-213, July.
    6. Inesi, M. Ena, 2010. "Power and loss aversion," Organizational Behavior and Human Decision Processes, Elsevier, vol. 112(1), pages 58-69, May.
    7. See, Kelly E. & Morrison, Elizabeth W. & Rothman, Naomi B. & Soll, Jack B., 2011. "The detrimental effects of power on confidence, advice taking, and accuracy," Organizational Behavior and Human Decision Processes, Elsevier, vol. 116(2), pages 272-285.
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    Cited by:
    1. Brion, Sebastien & Anderson, Cameron, 2013. "The loss of power: How illusions of alliance contribute to powerholders’ downfall," Organizational Behavior and Human Decision Processes, Elsevier, vol. 121(1), pages 129-139.

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