Social Reactions to Overconfidence: Do the Costs of Overconfidence Outweigh the Benefits?
Scholars have recently proposed that overconfidence pervades self-judgment because of the social benefits it provides individuals, such as higher status in groups (Anderson, Brion, & Moore, 2010). A counter-argument to this social-functional account of overconfidence is that the possible social costs of overconfidence could outweigh its benefits. Specifically, individuals could be severely punished by groups if their overconfidence were to become apparent to others. This paper examines social reactions to overconfidence by exploring whether groups in fact punish individuals revealed to be overconfident. In three laboratory studies, we found that groups did not react negatively to individuals revealed to be overconfident and in fact tended to view overconfident individuals as more socially skilled. This research lends further empirical support to the social-functional account of overconfidence by suggesting that the status-related benefits of overconfidence outweigh the possible social costs.
|Date of creation:||30 Mar 2011|
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- Dan Lovallo & Colin Camerer, 1999. "Overconfidence and Excess Entry: An Experimental Approach," American Economic Review, American Economic Association, vol. 89(1), pages 306-318, March.
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- Brad M. Barber & Terrance Odean, 2000. "Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors," Journal of Finance, American Finance Association, vol. 55(2), pages 773-806, 04.
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- Moore, Don A., 2007. "Not so above average after all: When people believe they are worse than average and its implications for theories of bias in social comparison," Organizational Behavior and Human Decision Processes, Elsevier, vol. 102(1), pages 42-58, January.
- Larrick, Richard P. & Burson, Katherine A. & Soll, Jack B., 2007. "Social comparison and confidence: When thinking you're better than average predicts overconfidence (and when it does not)," Organizational Behavior and Human Decision Processes, Elsevier, vol. 102(1), pages 76-94, January.
- Moore, Don A. & Klein, William M.P., 2008. "Use of absolute and comparative performance feedback in absolute and comparative judgments and decisions," Organizational Behavior and Human Decision Processes, Elsevier, vol. 107(1), pages 60-74, September.
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