Source: Université de Genève
Does the potential to win or lose money influence the confidence one has in one's own decisions?
Researchers investigated confidence bias in a learning context through a system of monetary punishment and reward.
They demonstrated that we become more confident in our choices when learning to seek rewards.
However, this confidence evolves into over-confidence. Moreover, the monetary gains makes us less flexible, while the fear of losing money preserves our ability to adapt.
The fear of loss makes people anxious and they begin to doubt their choices; yet it also provides more flexibility and accuracy
The lure of profit, on the other hand, boosts self-confidence and well-being but reduces our ability to make assessments