Overconfidence bias (Why do we think we are better in some areas than we really are?)
The overconfidence bias, a brief explanation
What is the overconfidence bias?
The overconfidence bias is the tendency to think that we are better and more accomplished in some areas than we actually are.
Examples
When finding your way around a new city on holiday you may think that you have a great ‘sense of direction’, but this overconfidence could lead to you getting lost.
When driving you may think that you a great driver who makes no mistakes until you get caught speeding.
The literature
Kansal, P. & Singh, S. (2018). Determinants of overconfidence bias in Indian stock market. Qualitative Research in Financial Markets, 10(4), 381-394.
Proeger, T. & Maub, L. (2014). Overconfidence as a social bias: experimental evidence. Economics Letters, 122(2), 203-207. Doi: 10.1016/j.econlet.2013.11.027
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