Last updated May 30, 2018 at 3:38 pm
How confident are you in your decisions? What if there was money involved?
Making decisions is all about feeling confident that your decision is correct. Scientists have discovered that the bigger an incentive, the more (over)confidence people have in their decision.
How confident are you in your decisions? For some people, particularly those in high-stake situations such as medical or financial decision-making, knowing how much to trust an individual’s decisions and their confidence accuracy is critical. It becomes risky when overconfidence leads to poor or risky decision making.
Previous studies have hypothesised that incentivising confidence accuracy would result in less bias. However, other studies have suggested that incentives would have negative effects on the quality of confidence judgements.
It’s more than perceptions
By assigning test subjects a simple task that required them to make a decision based on perception. A pair of visuals called Gabor patches were shown on a computer screen and participants had to pick which one had the highest contrast. They were asked to judge the probability of their answer being correct.
However, before they had to judge their own answers, the stakes were raised. Before giving their confidence judgment, a monetary incentive was given – either no incentive, or the possibility of gaining – or losing – 10c, 1€, and 2€. Doing this after the initial visual task ensures that the incentive doesn’t affect the initial decision making. Four different experiments with new participants each time tested for all the variables in different combinations.
They found that participants’ confidence judgements increased when there was a possibility of monetary gains. High confidence was more closely associated with correct decisions with an incentive, to the point that it detrimentally increased the overconfidence bias. Meanwhile, the possibility of a loss decreased confidence reports.
The authors point out that the scale of monetary stakes when they increase to much larger amounts remains an open question. Particularly, higher risk can also affect physiological arousal like seen in those with gambling addictions.
The researchers believe that their study provides insight for poor decision making from overconfidence in high stake environments.
The research was published in Science Advances.