Beyond Overconfidence: Exploring the Role of Confidence Sensitivity and Meta-Confidence in Career Choices

This paper experimentally investigates the role of confidence sensitivity and meta-confidence in career-related decision-making. While the effects of overconfidence on economic outcomes are well-documented, the implications of confidence sensitivity -the ability to distinguish between one's successes and failures -have been largely overlooked. Yet, in various contexts, a lack of sensitivity could be just as detrimental as overconfidence, particularly when it hinders individuals from accurately assessing their strengths and weaknesses before making critical career choices. Moreover, recent research in cognitive psychology suggests that individuals can form informative beliefs about their own confidence sensitivity, but whether such "meta-confidence" influences their behavior remains an open question. To address these questions, we design an experiment that measures participants' confidence sensitivity and meta-confidence in a setting where they perform a task and choose between a competitive or non-competitive compensation scheme. Additionally, some participants are given the option to seek performance feedback before making their decision. Our results show that confidence sensitivity significantly improves the quality of compensation scheme decisions, while low meta-confidence is associated with increased feedback-seeking behavior prior to the compensation decision. We provide causal evidence for this latter finding: a treatment condition designed to reduce meta-confidence led to an increased willingness to seek feedback. Overall, this paper highlights the richness of individuals' beliefs about their abilities and demonstrates how integrating insights from cognitive psychology can offer new perspectives on economic decision-making.