Confidence is essential to help boost one's self-esteem; however, being overly confident can produce adverse effects on one's performance and decision-making.

Haas School associate professor, Cameron Anderson, c-authored a new study "A Status-Enhancement Account of Overconfidence," where he found social status promotes overconfidence.

"Our studies found that overconfidence helped people attain social status. People who believed they were better than others, even when they weren't, were given a higher place in the social ladder. And the motive to attain higher social status thus spurred overconfidence," Anderson said.

Social status is defined as the respect, prominence and influence an individual has in the eyes of others. According to Anderson these "alpha" individuals have more clout compared to others. His findings demonstrated believing one is better than the other has profound social benefits for the "alpha" individual.

"In organizations, people are very easily swayed by others' confidence even when that confidence is unjustified," says Anderson. "Displays of confidence are given an inordinate amount of weight." However, Anderson states having confidence may be a sign of one's ability to perform, but more times individuals who are overly confident lack true skills and competence.

Anderson alongside a team of colleagues conducted six experiments to monitor why people become overconfident and how overconfidence equates to a rise in social stature. In one experiment, researchers instructed 242 MBA students to look over a list of historical names, historical events, books and poems, and then identify which ones they knew or recognized. 

The terms included Maximilien Robespierre, Lusitania, Wounded Knee, Pygmalion, and Doctor Faustus. What the participants did not know was many of the terms were made up, which the team dubbed as "foils." Researchers observed, that the participants who picked the most foils, were the ones who were overly confident because they believed they were most knowledgeable. At the end of the survey the ones who picked the most foils were regarded highest in their social status among the group.

"This overconfidence did not come across as narcissistic," explains Anderson. "The most overconfident people were considered the most beloved." In another experiment Anderson and his team observed behaviors such as body language, vocal tone and rates of participation which were recorded on video. Through the video recordings, it was observed that overconfident individuals were more likely to speak, use a confident vocal tone, provide more information and answers and acted calmly and relaxed while they worked with their counterparts. The overly confident individuals were found to exhibit more convincing behaviors compared to their counterparts who were highly competent.

"These big participators were not obnoxious, they didn't say, 'I'm really good at this.' Instead, their behavior was much more subtle. They simply participated more and exhibited more comfort with the task – even though they were no more competent than anyone else," Anderson said. 

The last two experiments revealed the "desire" for status encourages people to be more confident. In the sixth study, researchers instructed individuals to read two different stories and then rate themselves on a number of competencies, critical thinking skills, intelligence and the ability to work in teams. Of the individuals who read the story where the reader imagined receiving a job offer for a prestigious company that had opportunities to obtain a higher status, rated their skills and talent much higher than the group who did not read that story.

Anderson hopes with this new information people will praise the ability and merit in others, rather than overvaluing unsubstantial confidence.

The study was published in the Journal of Personality and Social Psychology.