If people think that his personal ability can influence the company profitability , he is exhibit in illusion of control or overconfident bias?How to differentiate these two biase . Thanks
I think there is a very thin line between both.
Illusion of control is a false sense of control over an event you do not control, while overconfidence exaggerates one’s ability and skills to achieve a desired goal.
if you think that you are responsible for a company’s performance … (think republican front runner in the US) – then you have illusion of control…
I remember seeing a similar question in the books about a situation where the person was affected by both biases. I believe the explanation was that this kind of behaviour is more an emotional attitude when one is overconfident about his abilities to affect the trades, beat the market etc. We have to look at the reason behind the feeling as well. Is he confident because he thinks he has more data than another person - if this is the case then it sounds more like illusion of control.
I understand “overconfidence” to be an over estimation of the quality of one’s forecasts, along with an under estimation of true risk as a result of this.
This tends to lead to “point estimates” or bands of estimates that are too narrow, given the real dispersion of possible outcomes.
I don’t see overconfidence having anything to do with the confidence that you can “control” an outcome, just that you can “predict” the outcome.
Whereas illusion of control obviously adds the “control” element.
Illusion of control could possibly lead to overconfidence though I think.
Reiterating the above, overconfidence usually in this context also adds an emotional variable. While the illusion of control is a more objective bias.
Illusion of control = Beliefe Perseverance
Overconfidence = Emotional Bias