The authors present a reconciliation of 3 distinct ways in which the research literature has defined overconfidence: (a) overestimation of one's actual performance, (b) overplacement of one's performance relative to others, and (c) excessive precision in one's beliefs. Experimental evidence shows that reversals of the first 2 (apparent underconfidence), when they occur, tend to be on different types of tasks. On difficult tasks, people overestimate their actual performances but also mistakenly believe that they are worse than others; on easy tasks, people underestimate their actual performances but mistakenly believe they are better than others. The authors offer a straightforward theory that can explain these inconsistencies. Overprecision appears to be more persistent than either of the other 2 types of overconfidence, but its presence reduces the magnitude of both overestimation and overplacement. Keywords: overconfidence, underconfidence, overestimation, overplacement, overprecision Overconfidence can have some serious consequences. Researchers have offered overconfidence as an explanation for wars, strikes, litigation, entrepreneurial failures, and stock market bubbles (Camerer & Lovallo, 1999; Glaser & Weber, 2007; Howard, 1983; Johnson, 2004; Malmendier & Tate, 2005; Neale & Bazerman, 1985; Odean, 1999) . In the words of one popular text on judgment, "No problem in judgment and decision making is more prevalent and more potentially catastrophic than overconfidence" (Plous, 1993, p. 217). Because of its generality and importance, overconfidence research has been broadly influential outside of psychology (Daniel, Hirshleifer, & Subrahmanyam, 1998; García, Sangiorgi, & Urosevic, 2007; Hoelzl & Rustichini, 2005; SantosPinto & Sobel, 2005; Statman, Thorley, & Vorkink, 2006) . However, overconfidence has been studied in inconsistent ways. In this article, we examine the three different ways that overconfidence has been studied and attempt to reconcile the contradictory results from those studies. A search of the PsycINFO database using the word overconfidence yielded 365 hits, 72% of which are empirical studies. This literature has defined overconfidence in three distinct ways. The first definition of overconfidence is the overestimation of one's actual ability, performance, level of control, or chance of success. To distinguish it from the other forms of overconfidence, we call this overestimation. If a student who took a 10-item quiz believes that he answered five of the questions correctly when, in fact, he got only three correct, then he has overestimated his score. Roughly 64% of empirical studies on overconfidence examined overestimation. The second variety of overconfidence occurs when people believe themselves to be better than others, such as when a majority of people rate themselves better than the median. 1 Roughly 5% of empirical overconfidence studies examined this phenomenon. Note that this research has not always used the term overconfidence-a search using the more specific term better-than-average produced another 146 articles (for a review of this literature, see Alicke & Govorun, 2005) . Following Larrick, Burson, and Soll (2007) , we call this overplacement. If a student guessed that her score was the best in the class when, in fact, half of the class scored better than she did, then she has overplaced her score relative to those of others. The third variety of overconfidence is excessive certainty regarding the accuracy of one's beliefs, or what we call overprecision. Roughly 31% of empirical overconfidence studies examined overprecision. Researchers examining overprecision typically ask their participants questions with numerical answers (e.g., "How long is the Nile River?") and then have participants estimate 90% confidence intervals around their answers. Results show that these confidence intervals are too narrow, suggesting that people are too sure they know the correct answer; 90% confidence intervals contain the correct answer less than 50% of the time (Alpert &
See Moore and Healy REF for a reconciliation of existing studies on overconfidence.
The Trouble With Overconfidence
Psychological review
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