Overconfidence in predictions as an effect of desirability bias
pp. 163-180
in: Mohammed Abdellaoui, John D. Hey (eds), Advances in decision making under risk and uncertainty, Berlin, Springer, 2008Abstract
Most people hold unrealistic positive beliefs about their personal skills, their knowledge (Fischoff, Slovic, & Lichtenstein, 1977), and their possibilities to overcome the performance of other individuals (Weinstein, 1980). This general tendency, called overconfidence, is a stable and pervasive finding both in many real-life domains and in several experimental settings. People are overconfident about their driving skills (Svenson, 1981), about their ability as basketball players (McGraw, Mellers, & Ritov, 2004), about their competence in financial and managerial problems (Camerer & Lovallo, 1999; Mahajan, 1992), and about their general knowledge (Juslin, 1994; Harvey, 1997). This systematic overestimation of one's own capabilities and probabilities of success can have important consequences, and sometimes results in suboptimal decisions.