The Influence of Knowledge on Overconfidence: Consequences for Management and Project Planning

Abstract

Many challenging decisions are made under uncertainty, forcing managers to judge situations without in-depth knowledge of details or potential future outcomes. Earlier research shows that people tend to be overconfident about the accuracy of their judgments and comparatively optimistic about their future prospects, which means that people believe that they are more likely than others to experience positive events and less likely to suffer negative ones. Managers are likely to make decisions based on overconfident judgments and overly positive assessments of potential outcomes. In this study, we show that overconfidence is higher when little task-specific knowledge is available, which increases the likelihood of making incorrect decisions when faced with low knowledge. In a second step we investigate individual differences in overconfidence, whereby a cluster analysis reveals different behavioral patterns among participants (117 students) with low task-specific knowledge. Two main groups emerge among those with low task-specific knowledge. People characterized by low comparative optimism acknowledge their lack of knowledge and consequently exhibit little overconfidence. The vast majority of participants with low task-specific knowledge, However, display strong overconfidence in the accuracy of their judgments. We propose that self-enhancement motives are a reason for this increased overconfidence. Decision makers must be aware of overconfident judgments and also consider individual differences in overconfidence in order to make the right decisions.

More Useful to You: Believing That Others Find the Same Objects More Useful

“…We mentioned that there are two potential sources of the below-average effect in perceived materialism: asymmetrical exposure to others' (vs. one's) behavior, and self-serving motives. The scholarly debate on which of these is the more likely cause of above-and belowaverage effects is vast (Alicke 1985;Brown 1986Brown , 2012Deri et al 2017;Dunning, Meyerowitz, and Holzberg 2005;Ehrlinger et al 2008;Fabricius and Büttgen 2013;Kahneman and Tversky 1996;Logg, Haran, and Moore 2018). Although self-serving motives formed the basis for our hypotheses (and we observed underestimation of own materialism in Study 2), it is possible that both sources contribute.…”

How National Culture Influences the Speed of COVID-19 Spread: Three Cross-Cultural Studies

“…Consequently, they are more likely to rely on traditional knowledge and known technologies for the initial management of pandemic, leading to over-confidence about their immunity. Prior research shows that knowledge deemed relevant to an issue breeds an overconfidence bias ( Fabricius & Buttgen, 2013 ). Overconfidence based on known solutions that possibly worked in alternative situations makes them less concerned about the new virus and less likely to change their behaviors to follow new social distancing guidelines or lockdown rules, leading to the faster spread of COVID-19.…”

Is overconfidence a motivated bias? Experimental evidence.

“…Many have argued that BTA beliefs are driven by the desire to view oneself positively (Dunning, 2005; Fabricius & Büttgen, 2013; Greenwald, 1980; Kunda, 1990; Radhakrishnan, Arrow, & Sniezek, 1996; Sedikides & Gregg, 2008; Taylor & Brown, 1994). In fact, the assumption that flattering self-perceptions are motivated is so pervasive that some have claimed a “well-established connection between traditional optimism biases and motivated reasoning” (O’Brien, 2013, p. 847) and that “the better-than-average bias is caused by our strong unconscious desire to maintain a positive self-view” (Chamorro-Premuzic, 2013, p. 12).…”