Deception and Self-Deception

The Review of Economic Studies, 2013

Evidence from both psychology and economics indicates that individuals give statements that appear to overestimate their ability compared to that of others. We test three theories that predict such relative overconfidence. The first theory argues that overconfidence can be generated by Bayesian updating from a common prior and truthful statements if individuals do not know their true type. The second theory suggests that self-image concerns asymmetrically affect the choice to receive new information about one's abilities, and this asymmetry can produce overconfidence. The third theory is that overconfidence is induced by the desire to send positive signals to others about one's own skill; this suggests either a bias in judgment, strategic lying, or both. We formulate this theory precisely. Using a large data set of relative ability judgments about two cognitive tests, we reject the restrictions imposed by the Bayesian model and also reject a key prediction of the self-image models that individuals with optimistic beliefs will be less likely to search for further information about their skill because this information might shatter their self-image. We provide evidence that personality traits strongly affect relative ability judgments in a pattern that is consistent with the third theory of social signaling. Our results together suggest that overconfidence in statements is more likely to be induced by social concerns than by either of the other two factors.

Standard economic models assume that individuals collect and process information in a way that gives them a relatively accurate perception of reality. However, this assumption is often violated. Data shows that individuals often form positively biased beliefs about themselves, which can have detrimental economic consequences. This thesis aims to explain the persistence of overconfidence in social interactions by showing the existence of strategic benefits of being overconfident that offset its social cost. Using a series of laboratory experiments, this thesis shows that (i) overconfidence emerges primarily when it provides an advantage in social interactions (Chapter 2) and (ii) identify situations in which overconfidence is likely to be socially detrimental (Chapter 3 and 4). This thesis contributes to the literature by enhancing our understanding of the situational determinants of overconfidence in social interactions and lay the foundations to improve policies intended to prevent or limit its negative effects.

2010

Overconfidence is a Social Signaling Bias * Evidence from psychology and economics indicates that many individuals overestimate their ability, both absolutely and relatively. We test three different theories about observed relative overconfidence. The first theory notes that simple statistical comparisons (for example, whether the fraction of individuals rating own skill above the median value is larger than half) are compatible (Benoît and Dubra, 2007) with a Bayesian model of updating from a common prior and truthful statements. We show that such model imposes testable restrictions on relative ability judgments, and we test the restrictions. Data on 1,016 individuals' relative ability judgments about two cognitive tests rejects the Bayesian model. The second theory suggests that self-image concerns asymmetrically affect the choice to get new information about one's abilities, and this asymmetry produces overconfidence (Kőszegi, 2006; Weinberg, 2006). We test an important specific prediction of these models: individuals with a higher belief will be less likely to search for further information about their skill, because this information might make this belief worse. Our data also reject this prediction. The third theory is that overconfidence is induced by the desire to send positive signals to others about one's own skill; this suggests either a bias in judgment, strategic lying, or both. We provide evidence that personality traits strongly affect relative ability judgments in a pattern that is consistent with this third theory. Our results together suggest that overconfidence in statements is most likely to be induced by social concerns than by either of the other two factors.

h i g h l i g h t s

Evolution and Human Behavior, 2016

Because communication can be abused by senders, it is not inherently stable. One way of stabilizing communication is for senders to commit to their messages. If a sender is committed to a message, she is willing to incur a cost (direct or reputational) if the message is found to be unreliable. This cost provides a reason for receivers to accept messages to which senders are committed. We suggest that expressions of confidence can be used as commitment signals: messages expressed more confidently commit their senders more. On this basis, we make three predictions: that confidently expressed messages are more persuasive (H1', already well established), that senders whose messages were accepted due to the senders' confidence but were then found to be unreliable should incur costs (H2'), and that if a message is accepted for reasons other than confidence, when it is found to be unreliable the sender should incur lower reputational costs than if the message had been accepted on the basis of the sender's confidence (H3'). A review of the literature revealed broadly supportive but still ambiguous evidence for H2' and no tests of H3'. In experiments 1, 2, and 3 (testing H2') participants received the same advice from two senders, one being confident and the other unconfident. Participants were more likely to follow the advice of the confident sender, but once the advice was revealed to have been misguided, participants adjusted their trust so that they trusted the initially unconfident sender more than the confident sender. In experiments 3 and 4 (testing H3') participants chose between either two senders differing in confidence or two senders differing in competence. Participants followed the advice of the confident sender and of the competent sender. When it was revealed that the advice was misguided, the confident sender suffered from a larger drop in trust than the competent sender. These results are relevant for communicative theories of overconfidence.

Journal of Economic Psychology

Self-deception is both commonplace and costly, which raises the question of what purpose it might serve. According to the dominant explanation in psychology and economics, selfdeception is an intrapersonal process that fortifies and protects the self from threatening information. An alternative possibility is that self-deception evolved as an interpersonal strategy to persuade others. To investigate interpersonal aspects of self-deception, we gave people a persuasive task and measured their information processing biases and their persuasiveness. Results revealed that people who were financially motivated to persuade another person in a particular direction demonstrated a self-deceptive information processing bias consistent with their persuasive goals. This information processing bias led people to convince themselves of the veracity of their persuasive goal, and subsequently to be more persuasive to others. These findings suggest that self-deception has interpersonal benefits that offset its costs.

2011

Evidence from social psychology suggests that agents process information about their own ability in a biased manner. This evidence has motivated exciting research in behavioral economics, but also garnered critics who point out that it is potentially consistent with standard Bayesian updating. We implement a direct experimental test. We study a large sample of 656 undergraduate students, tracking the evolution of their beliefs about their own relative performance on an IQ test as they receive noisy feedback from a known data-generating process. Our design lets us repeatedly measure the complete relevant belief distribution incentive-compatibly. We find that subjects (1) place approximately full weight on their priors, but (2) are asymmetric, over-weighting positive feedback relative to negative, and (3) conservative, updating too little in response to both positive and negative signals. These biases are substantially less pronounced in a placebo experiment where ego is not at stake. We also find that (4) a substantial portion of subjects are averse to receiving information about their ability, and that (5) less confident subjects are more likely to be averse. We unify these phenomena by showing that they all arise naturally in a simple model of optimally biased Bayesian information processing.

Experimental Economics, 2017

We test experimentally an explanation of over and under confidence as motivated by (perhaps unconscious) strategic concerns, and find compelling evidence supporting this hypothesis in the behavior of participants who send and respond to others' statements of confidence about how well they have scored on an IQ test. In two-player tournaments where the highest score wins, one is likely to enter at equilibrium when he knows that his stated confidence is higher than the other player's, but very unlikely when the reverse is true. Consistent with this behavior, stated confidence by males is inflated when deterrence is strategically optimal and is instead deflated by males and females when hustling (encouraging entry) is strategically optimal. This behavior is consistent with the equilibrium of the corresponding signaling game. Based on the theory of salient perturbations, we propose a strategic foundation of overconfidence. Since overconfident statements are used in familiar situations in which it is strategically effective, it may also occur in the absence of strategic benefits, provided the environment is similar.

Self-deception is widespread in humans even though it can lead to disastrous consequences such as airplane crashes and financial meltdowns. Why is this potentially harmful trait so common? A controversial theory proposes that self-deception evolved to facilitate the deception of others. We test this hypothesis in the real world and find support for it: Overconfident individuals are overrated by observers and underconfident individuals are judged by observers to be worse than they actually are. Our findings suggest that people may not always reward the more accomplished individual but rather the more self-deceived. Moreover, if overconfident individuals are more likely to be risk-prone then by promoting them we may be creating institutions, including banks and armies, which are more vulnerable to risk. Our results reveal practical solutions for assessing individuals that circumvent the influence of self-deception and can be implemented in a range of organizations including educational institutions.

Journal of Personality and Social Psychology, 1990

In five studies with overlapping designs and intents, subjects predicted a specific peer's responses to a variety of stimulus situations, each of which offered a pair of mutually exclusive and exhaustive response alternatives. Each prediction was accompanied by a subjective probability estimate reflecting the subjects' confidence in its accuracy--a measure validated in Study 5 by having subjects choose whether to "gamble" on the accuracy of their prediction or on the outcome of a simple aleatory event. Our primary finding was that in social prediction, as in other judgmental domains, subjects consistently proved to be highly overconfident. That is, regardless of the type of prediction item (e.g., responses to hypothetical dilemmas, responses to contrived laboratory situations, or selfreports of everyday behaviors) and regardless of the type of information available about the person whose responses they were predicting (e.g., predictions about roommates or predictions based on prior interviews), the levels of accuracy subjects achieved fell considerably below the levels required to justify their confidence levels. Further analysis revealed two specific sources of overconfidence.