Affect and overconfidence: A laboratory investigation.

Abstract

We conduct 2 incentivized random-assignment experiments to investigate whether overconfidence is impacted by (a) incidental mild positive affect, or (b) incidental mild negative affects-anger, fear, and sadness. We measure overconfidence using overestimation of past quiz-performance and overestimation of past quizperformance compared to peers. The results of the first experiment indicate that the effect of positive affect on both measures of overconfidence is positive and significant for male subjects. Although mood-inducement is equally successful for female subjects, their overconfidence is unaffected by positive affect. These positive affect results are robust to various specification checks. In the second experiment, we find consistent evidence of neither anger, fear, nor sadness's effect on overconfidence; the lack of a result is attributable either to a genuine lack of relationship between these affects and overconfidence or to confounded moodinducements. The effect of positive affect on overconfidence may help explain the relationship between mood and speculative bubbles and between mood and trading volume. Further, our results have implications for the effect of happiness on overconfidence and the role of emotions in economic decision-making, in general. Finally, we examine the neural evidence supported by our data.

Revisiting the form and function of conflict: Neurobiological, psychological, and cultural mechanisms for attack and defense within and between groups

“…Overconfidence has been linked to neuronal processes that we identified as involved in attack, including positive affect (Ifcher & Zarghamee 2014; Koellinger & Treffers 2015), the release of testosterone (Johnson 2006), and activation in reward processing areas such as the bilateral striatum (Molenberghs et al 2016). In that sense, overconfidence may be functional to attack; it enables people to compete under risk (de la Rosa 2011; Johnson & Fowler 2011; Li et al 2016).…”

Pricing competition: a new laboratory measure of gender differences in the willingness to compete

“…Male college students are believed to be more overconfident than female college students, especially in stereotypically male tasks (Croson & Gneezy, 2009;Ifcher & Zarghamee 2014;NV, 2007). In our sample, men's mean task-3 self-rank (where 1 = 1 st best, …, 4 = 4 th best) is significantly higher than women's (1.7 versus 2.3, p = 0.00), even though men's mean task-3 performance is not significantly better than women's (11.4 versus 11.0, p = 0.71).…”

Competition and subsequent risk-taking behaviour: Heterogeneity across gender and outcomes

“…In order to check whether confidence has explanatory power in our setting, before performing the effort task, we elicit subjects' expectations on their performance. We then use the difference between expected and realized score to measure their confidence, as commonly done in the literature on overconfidence (De Paola et al, 2014;Ifcher and Zarghamee, 2014). A negative number means that subjects are underconfident, as they identify more coins than what they expected.…”