Overconfidence through Group Composition

Moore and Healy (2008) present 3 distinct ways in which the research literature has defined overconfidence: (a) overestimation of one’s actual performance, (b) over-placement of one’s performance relative to others and (c) excessive precision in one’s belief (over-precision). This thesis has attempted to find out what the influence of group composition is on the three types of overconfidence through conducting a hypothetical pub quiz among students. In the treatment group (n=30), subjects were told that they were competing with lower-skilled and less-educated participants, whereas in the control group (n=30) their opponents were university students just like the respondents. The results have shown that overestimation occurs more when a student is hypothetical surrounded by lower-skilled and less-educated participants than themselves. On the other hand, the student is under-placing herself/himself to other participants. Further, it is shown that people, especially men, who are very confident about their own performance, are willing to bet more money in competitions. A number of possible explanations for the results and corresponding recommendations will be outlined in the conclusion of this study.