Peer Response-Confidence and Decision-Making in Financial Decisions

Peer Response-Confidence and Decision-Making in Financial Decisions

Hello,

This is a great post. As you have noted, confidence and decision-making are intuitively associated. Confidence is needed to make and pursue decisions that one thinks are the best. This means that regardless of the available options. People will usually pursue a solution or a decision that they feel will sort out a challenge or an issue. Sometimes, the decision-maker is overconfident in their knowledge of the subject matter, such as in financial decisions. As you have noted, overconfidence in the decision leads to the escalation of commitment to that decision and failure to consider other options or external/stakeholder input. Overconfidence, as noted in a study focused on the construction industry, is linked to carelessness and inadequate stakeholder engagement during decision-making, which can impact the implementation of health and safety measures in construction sites (Ebenezer Olowolayemo et al., 2022). This means that overconfidence is a risk factor for errors, destruction of confidence in teamwork, and loss of confidence in the decision-makers.

References

Ebenezer Olowolayemo, O., Oluwaseun Ebenezer, O., Abiodun, K., Akintoye Benson, O., Austin Sanya, O., & Abiodun Racheal, A. (2022). Factors Militating Against Implementation of Health and Safety Precautions Among Construction Site Stakeholders: A Case Study of Ondo State, Nigeria. International Journal of Research in Engineering and Science (IJRES) ISSN, 10, 484–488.

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Peer 2.) The overconfidence effect is observed when people’s subjective confidence in their own ability is greater than their objective (actual) performance (Pallier et al., 2002). I tend to strive for better in everything I do. According to the Journal of Experimental Social Psychology (2017), There is an intuitive association between confidence and decision-making: We are most likely to commit our time, effort, and financial resources to pursue those decisions about which we are most confident (Ronay, R.D., et al. 2017).

Four studies were conducted in this experiment that relates to overconfidence, general knowledge, and the escalation of commitment with certain financial decisions. There in fact were differences in each experiment but in conclusion overconfidence does not alone work with the escalation of commitment. Rather, it is a public commitment that secures confidence to the expensive inquiry of failing ventures.