Decision Making Consequences of the Paradoxical Flip

Abstract

The hard-easy manipulation (i.e., manipulation of item difficulty) has been used to demonstrate that participants are sometimes overconfident while believing they are worse than average. This finding is often referred to as a paradoxical flip. Prior research has examined how this reversal occurs and whether it is a real psychological phenomenon. The purpose of this study is to investigate the paradoxical flip's decision making consequences in terms of losing bets and to determine if the paradoxical flip can be abated by providing participants with additional information concerning their cohort's performance. Results indicated that people exhibiting decision behaviors consistent with the paradoxical flip do lose more bets. However, additional cohort performance information did not reduce the amount of the paradoxical flip.