Title: Confidence and Overconfidence when Making Complex, Strategic Decisions
Author(s) : David McLain, Thu Ta
This paper describes confidence as a predictor of performance when making complex, team-based decisions in a business strategy game. Findings suggest a pervasive overconfidence effect, evidenced by a consistent reduction in confidence once the performance results of decisions became known. Although this effect persisted over repeated decisions; it also consistently predicted strategy performance. This predictive ability was stronger for financial performance, as simulated earnings-per-share, than for the non-financial outcome of company image. A decision maker’s confidence in his or her own process and decisions was lower than in the team’s process and decisions although confidence in the team’s decisions was greater than confidence in the team’s process. The findings are interpreted in terms of theory of overconfidence when making complex, uncertain decisions. The decision confidence measure developed for this study may be useful in future confidence studies.