Joy Leads to Overconfidence – and A Simple Remedy

Abstract

Overconfidence has been identified as a source of suboptimal decision making across many real-life domains, often with far- reaching consequences. Here, we demonstrate a causal mechanism that leads to overconfidence and show a simple, effective remedy in an incentive-compatible experimental study. Concurrent with the affect-as-information hypothesis, we find that joy induces overconfidence if the reason for joy (an unexpected gift) is unrelated to the judgment task and participants were not made specifically aware of our mood manipulation. In contrast, we observed well-calibrated judgments for participants in a control group who were in their resting mood. Furthermore, we also found well-calibrated judgments among participants who received the joyful mood induction along with questions that forced them to reflect about their current mood, its cause, and the (ir)relevance of its cause for our judgment tasks. Our findings suggest that being aware of one’s positive mood and its reason can be an effective, short- term remedy against overconfidence.