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November 13, 2025 | Research Brief

How Overconfidence Distorts Group Perceptions and Leads to Prejudice

Prejudiced beliefs result from overconfidence and perceiving society in terms of social groups. Thinking in terms of each person as an individual, rather than a member of a group, reduces this bias.

Cowles Foundation Research Brief

Have you ever failed to achieve something you thought you deserved? Did you lose confidence in your abilities as a result, or did you look for another explanation? 

The latter could lead down a dangerous path to prejudice. 

Work by Paul Heidhues, Botond Koszegi and Yale economist Philipp Strack builds on two basic principles: First, every person belongs to certain social categories such as gender, religion, political views and so on. By definition, most people will belong to more than one group. For example, one could belong to female and Catholic groups simultaneously.

The second principle is that people tend to believe their own groups are superior to others’. The paper’s authors surmise this is due to attributing more of our own group’s success to competence than outsider’s groups.

According to the theory, we are constantly observing how others are received in society: be it with job promotions or jail time.

We view these outcomes as a combination of people’s competence and societal factors that can work either in their favor, or against them. 

“If he conceives of each individual separately instead of in terms of group membership, then he develops unbiased beliefs about everyone. If he conceives of society in terms of groups, in contrast, he concludes that groups he belongs to or competes with are being treated differently, and develops in-group biases.”

When an overconfident person experiences a less-than-expected outcome, they will attribute it to discrimination against them, rather than to a lack of competence. As a result, overconfidence results in overestimating the amount of discrimination our social groups experience. Meanwhile we underestimate the level of discrimination against outside groups.

The prevalence of prejudice comes down to how we perceive society. The more we think in terms of group membership, the more prejudiced we become. Even grouping people who are similar, rather than categorizing them demographically, will eventually lead to biases.

The upshot of this theory is that it presents a way we can all reduce our biases. If we view others as distinct individuals, ignoring grouping, we will reduce our prejudice. 

Getting to know a greater number people through personal contact, for example, allows us to get more accurate information about others’ competence and their success.