Joy leads to overconfidence, and a simple countermeasure

Abstract

Overconfidence has been identified as a source of suboptimal decision making in many real-life domains, with often far-reaching consequences. This study identifies a mechanism that can cause overconfidence and demonstrates a simple, effective countermeasure in an incentive-compatible experimental study. We observed that joy induced overconfidence if the reason for joy (an unexpected gift) was unrelated to the judgment task and if participants were not made specifically aware of this mood manipulation. In contrast, we observed wellcalibrated judgments among participants in a control group who were in their resting mood. Furthermore, we found well-calibrated judgments among participants who received the joyful mood induction together with questions that forced them to reflect on their current mood and the (ir)relevance of its cause to our judgment tasks. Our findings suggest that being aware of one's positive mood and the reason for that mood may effectively reduce overconfidence for a short period.