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When overconfidence is revealed to others: Testing the status-enhancement theory of overconfidence

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  • Kennedy, Jessica A.
  • Anderson, Cameron
  • Moore, Don A.

Abstract

The status-enhancement theory of overconfidence proposes that overconfidence pervades self-judgment because it helps people attain higher social status. Prior work has found that highly confident individuals attained higher status regardless of whether their confidence was justified by actual ability (Anderson, Brion, Moore, & Kennedy, 2012). However, those initial findings were observed in contexts where individuals’ actual abilities were unlikely to be discovered by others. What happens to overconfident individuals when others learn how good they truly are at the task? If those individuals are penalized with status demotions, then the status costs might outweigh the status benefits of overconfidence – thereby casting doubt on the benefits of overconfidence. In three studies, we found that group members did not react negatively to individuals revealed as overconfident, and in fact still viewed them positively. Therefore, the status benefits of overconfidence outweighed any possible status costs, lending further support to the status-enhancement theory.

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  • Kennedy, Jessica A. & Anderson, Cameron & Moore, Don A., 2013. "When overconfidence is revealed to others: Testing the status-enhancement theory of overconfidence," Organizational Behavior and Human Decision Processes, Elsevier, vol. 122(2), pages 266-279.
    • Handle: RePEc:eee:jobhdp:v:122:y:2013:i:2:p:266-279
    DOI: 10.1016/j.obhdp.2013.08.005
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    3. Susan R Fisk & Jon Overton, 2020. "Bold or reckless? The impact of workplace risk-taking on attributions and expected outcomes," PLOS ONE, Public Library of Science, vol. 15(3), pages 1-19, March.
    4. Phua, Kenny & Tham, T. Mandy & Wei, Chishen, 2018. "Are overconfident CEOs better leaders? Evidence from stakeholder commitments," Journal of Financial Economics, Elsevier, vol. 127(3), pages 519-545.
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    7. Gao, Peng & Vochozka, Marek & Niu, Siqian, 2024. "The contagion effect of overconfidence in business group," International Review of Financial Analysis, Elsevier, vol. 91(C).
    8. Ba, Cuimin & Gindin, Alice, 2023. "A multi-agent model of misspecified learning with overconfidence," Games and Economic Behavior, Elsevier, vol. 142(C), pages 315-338.
    9. Neckermann, Jule, 2020. "Over-Confidence Bias in strategischen Entscheidungsprozessen: Entstehung, Konsequenzen und Lösungsansätze [Over-Confidence Bias in Strategic Decision-Making: Antecedents and Consequences]," Junior Management Science (JUMS), Junior Management Science e. V., vol. 5(3), pages 392-409.
    10. Chen, Si & Schildberg-Hörisch, Hannah, 2018. "Looking at the bright side: The motivation value of overconfidence," DICE Discussion Papers 291, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    11. Aghazadeh, Sanaz & Joe, Jennifer R., 2022. "Auditors' response to management confidence and misstatement risk," Accounting, Organizations and Society, Elsevier, vol. 101(C).
    12. Chen, Po-Jung & Hsu, Ching-Yu, 2022. "CEO optimism, CEO selection, compensation, and corporate investment decision: The case of CEOs who were rehired as CEOs by another firms after turnover," The North American Journal of Economics and Finance, Elsevier, vol. 63(C).
    13. Steffen Keck & Wenjie Tang, 2018. "Gender Composition and Group Confidence Judgment: The Perils of All-Male Groups," Management Science, INFORMS, vol. 64(12), pages 5877-5898, December.
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    15. Chen, Si & Schildberg-Hörisch, Hannah, 2019. "Looking at the bright side: The motivational value of confidence," European Economic Review, Elsevier, vol. 120(C).
    16. José J. Domínguez, 2021. "The Effectiveness of Committee Quotas; The Role of Group Dynamics," ThE Papers 21/12, Department of Economic Theory and Economic History of the University of Granada..
    17. Kray, Laura J. & Kennedy, Jessica A. & Van Zant, Alex B., 2014. "Not competent enough to know the difference? Gender stereotypes about women’s ease of being misled predict negotiator deception," Organizational Behavior and Human Decision Processes, Elsevier, vol. 125(2), pages 61-72.
    18. Stephen Benard & Pat Barclay, 2020. "Democratic Competition for Rank, Cooperation, and Deception in Small Groups," Social Science Quarterly, Southwestern Social Science Association, vol. 101(7), pages 2413-2436, December.
    19. Jeroen Nieboer, 2022. "Positional enhancement in effort-based social comparisons," Discussion Papers 2022-02, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    20. Lima de Miranda, Katharina & Detlefsen, Lena & Stolpe, Michael, 2020. "Overconfidence and hygiene non-compliance in hospitals," Kiel Working Papers 2156, Kiel Institute for the World Economy (IfW Kiel).
    21. Jeremy Koster & Brandy Aven, 2018. "The effects of individual status and group performance on network ties among teammates in the National Basketball Association," PLOS ONE, Public Library of Science, vol. 13(4), pages 1-18, April.
    22. Kennedy, Jessica A. & Schweitzer, Maurice E., 2018. "Building trust by tearing others down: When accusing others of unethical behavior engenders trust," Organizational Behavior and Human Decision Processes, Elsevier, vol. 149(C), pages 111-128.
    23. Hamza Fadhila & Azouzi Mohamed Ali & Jarboui Anis, 2014. "CEO's commitment bias, ownership concentration, and innovation decision: Behavioral management of CEO's discretion," Cogent Economics & Finance, Taylor & Francis Journals, vol. 2(1), pages 1-24, December.
    24. Carlin, Barbara A. & Gelb, Betsy D. & Belinne, Jamie K. & Ramchand, Latha, 2018. "Bridging the gender gap in confidence," Business Horizons, Elsevier, vol. 61(5), pages 765-774.
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