Reducing within-group overconfidence through group identity and between-group confidence judgments

Overconfidence in one's relative performance within a group is a wide-spread phenomenon. Similar to individual (or within-group) overconfidence, it was also shown that individuals are, on average, overconfident about the performance of their group relative to other groups. We hypothesize that this between-group overconfidence should mitigate within-group individual overconfidence. Simply put, if the decision maker believes that her group's ranking is high it must be because her beliefs about the performance of other members of her group are inflated, which we expect will lead to a reduction in her individual within-group overconfidence. We test this hypothesis in a laboratory experiment. Using a 2x2 between-subject design, we manipulate the salience of between-group confidence judgments and group identity. We find, as hypothesized, that the salience of between-group confidence judgments significantly reduces within-group individual overconfidence. We also find an equally strong reduction in within-group overconfidence from the group identity manipulation. For managers whose goal is to improve calibration of their employees, our results imply that activities promoting comparisons between groups, e.g., between firms or between teams within a firm, and strengthening organizational identity should be helpful.