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Identifying the Effects of Unjustified Confidence Versus Overconfidence: Lessons Learned from Two Analytic Methods

45 Pages Posted: 18 Feb 2010  

Andrew M. Parker

RAND Corporation

Eric R. Stone

Wake Forest University - Department of Psychology

Date Written: February 17, 2010

Abstract

One of the most common findings in behavioral decision research is that people often have unrealistic beliefs about how much they know, but only recently have researchers begun to examine the consequences of these unrealistic beliefs. Unfortunately, examination of this issue is complicated by the use of different ways of characterizing unrealistic beliefs about one’s knowledge. This paper examines the implications of two common measures – labeled overconfidence and unjustified confidence – showing how and where they can lead to different conclusions when used for prediction. The authors first consider conceptual, measurement, and analytic issues distinguishing these measures. Next, they provide a set of simulations designed to elucidate when these two different methods of characterizing unrealistic beliefs about one’s knowledge will lead to different conclusions. Finally, they illustrate the main findings from the simulations with three empirical examples drawn from our own data. The results highlight the need for clarity in the match between research question and measurement strategy.

Keywords: overconfidence, perceived knowledge, individual differences, decision making, judgment, metacognition

Suggested Citation

Parker, Andrew M. and Stone, Eric R., Identifying the Effects of Unjustified Confidence Versus Overconfidence: Lessons Learned from Two Analytic Methods (February 17, 2010). RAND Working Paper Series WR- 740. Available at SSRN: https://ssrn.com/abstract=1554686 or http://dx.doi.org/10.2139/ssrn.1554686

Andrew M. Parker (Contact Author)

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States

Eric R. Stone

Wake Forest University - Department of Psychology ( email )

2601 Wake Forest Road
Winston-Salem, NC 27109
United States
(336) 758-5729 (Phone)
(336) 758-4733 (Fax)

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