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Overconfidence bias, a well-documented phenomenon in psychology, is the tendency for an individual to overestimate their own abilities or the accuracy of their judgments (Bem & De Jong, 2013). This bias can influence many aspects of decision-making, leading to overestimations and incorrect predictions (Kassin, Privitera, & Clayton, 2022).
Overconfidence bias example. Overconfidence bias is a common decision trap, or a thought process that can lead to suboptimal decisions. Anyone can fall for it, even experts.
What Is the Overconfidence Bias? Overconfidence is a cognitive bias where we overestimate our abilities or knowledge. We incorrectly assume that we are better, wiser, or more capable than we are. This bias can seriously affect our behavior and ability to predict success and accurately gauge risk.
The overconfidence effect is a well-established bias in which a person's subjective confidence in their judgments is reliably greater than the objective accuracy of those judgments, especially when confidence is relatively high.
Many people, from novices to experts, overestimate their own abilities in a particular trade. Psychologists call this the overconfidence bias, and it manifests in all corners of life, from politics to investment decisions.
Overconfidence bias is a cognitive bias that can hurt investment returns by leading people to overestimate their knowledge and ignore relevant market information and feedback.
In overconfidence bias, people have overconfidence in their abilities, judgements, and beliefs, while in hindsight bias, people claim an event’s outcome to be more predictable than it actually was. Both biases significantly impact decision-making and result in negative results.
Definition: The Overconfidence Effect is a cognitive bias that causes people to overestimate their abilities and underestimate the difficulty of a task. It is a form of self-deception that can lead to poor decision-making and can have a negative impact on both individuals and organizations.
Overconfidence is one of the most powerful cognitive biases because it is so ubiquitous, and causes us to make important judgements and decisions without a sensible degree of consideration.
Overconfidence Bias illustrations, examples and solutions. Overconfidence bias is a cognitive bias that leads individuals to overestimate their own abilities, knowledge, or the accuracy of their beliefs and predictions.