Overconfidence refers to the phenomenon that people's confidence in their judgments and knowledge is higher than the accuracy of these judgments. To investigate this effect, the subjective judgment of confidence in the correctness of a set of answers is compared with the objective accuracy of these answers. In a typical study on overconfidence, participants solve a number of two-choice questions, such as “Which of these cities has more inhabitants: (a) Islamabad or (b) Hyderabad?” Participants answer each question and then indicate on a scale from 50% to 100% how confident they are that their answer is correct. The overconfidence effect occurs when the confidence ratings are larger than the percentage of correct responses. For example, typically only 75% of the answers, for which a participant ...

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