Overconfidence: The Influence of Positive and Negative Affect

Abstract

The consequences of overconfidence affect many spheres of economic life. As yet, few factors are known that determine the extent of possible overconfidence. There are also few studies concerning the influence of positive and negative emotions on self-assessment. It has not yet been examined whether emotions can affect learning effects regarding self-assessment, wherefore the present study addresses this research question. In a real-effort-task experiment the participants are presented with tasks over the course of 5 rounds. After each round, they are asked to assess their own performance. They are then given feedback on their actual performance, thereby allowing for learning effects. Their mood is induced by positive (treatment “positive”), negative (treatment “negative”) and neutral (treatment “neutral”) movie clips. There are no significant differences in the three treatments regarding absolute and relative overconfidence. However, the participants’ moods differed with regard to the occurrence of learning effects. Obvious learning effects can be established in a neutral mood when examining absolute overconfidence. These learning effects cannot be detected in positive and negative moods.