Consider a consumer deciding whether to buy a product they’re viewing online, a trust manager deciding whether to invest in a particular stock, or a doctor deciding whether to prescribe a patient a certain course of treatment.
Linking all of these cases is that the person making the decision will be guided by the confidence they have in their choices.
Lacking confidence, people may choose not to buy, invest, or prescribe, but instead to seek out more information — product reviews, the stock’s history, or further medical tests—before settling on a final decision. In the case of the online consumer, they may perhaps never to return to the site. Confidence judgements are ubiquitous in decision making. As such, we’d hope that these judgements are also accurate. But is this true?
Contextual factors influence our confidence
Behavioural science abounds with examples of people’s fallibility in judging confidence. Typically people tend to be overconfident in their decisions. One well-known study found that 93% of people think they are better than average drivers, a statistical impossibility. Overconfidence is similarly seen in business leaders judging the likely success of their firms, doctors in their diagnoses, and engineers in their calculations of the strength of dams and bridges.
In many cases people seem to derive confidence from contextual factors which are actually irrelevant to the decision. For example, if a decision feels easy and if the answer comes quickly to mind, people tend to feel confident in that answer. Yet that feeling of ‘fluency’ can be influenced by factors such as the clarity of the font in which a question is written. The consequences can be significant: Research has shown that some stocks may perform better than others simply because their names are easy to pronounce.
Promoting accurate decisions
Such findings focus on the irrationality of human decision making. But our research has found that people’s confidence judgements can also be remarkably accurate — that is, when people are very confident, they are nearly always correct in their decisions. Our lab is doing a range of experiments to help understand the basis for reliable confidence judgements, and how they can be used to promote more accurate decision making. A key aim of this research is to identify when confidence judgements are likely to be reliable and when they are not — a crucial step forward given people’s reliance on these judgements in every decision they make.
Group decision-making dynamics
A second line of our work focuses on how people make decisions in groups. Again research in this area provides grounds for optimism about accuracy: Evidence shows that people who share information about their confidence, not just about their decisions, can perform better than any individual acting alone, indicating that confidence judgements are reliable and very useful. We are now trying to understand how people can most effectively share information about confidence and use this information to make optimal choices.
How might businesses and marketers exploit this behavioural science research?
Here are two examples from the case mentioned above of an online consumer hesitating on a decision whether to “Add to Basket”:
- First, our research indicates that confidence builds more reliably when people are presented with clear information that they can put together over time. This suggests that an effective website might present smaller nuggets of information about a product, with the option to click to find out more information as and when they need.
- Second, individuals make better collective decisions when they share information about confidence. If so, then peer-to-peer recommendations will become more effective if users can share confidence information, not only a simple rating of a product. Intuitively we should put more trust in a rating that is based on a reviewer who has used a product for a year than a reviewer who has used it for a day.
Confidence plays a key role in human decision making. Behavioural science is just beginning to understand what confidence is and how people use it to inform their choices. These emerging findings have exciting potential to help optimise the decisions of organisations and the consumers they serve.
Dr Nick Yeung is a University Lecturer in Experimental Psychology at Oxford University. Nick provides advisory to Prime Decision on the topic of confidence in decision-making.