Behavioral Bias: Illusion of Control
I have decided to start posting a daily behavioral bias and it’s definition. I hope will lead to better thinking and investing.
Bias: The Illusion Of Control
Definition: “The illusion of control is the tendency for human beings to believe they can control or at least influence outcomes which they clearly cannot.”
Theory of Illusion Of Control (Via Yorku.Ca):
The theory of the illusion of control (IOC) was first defined by Ellen Langer (1975) as an expectancy of a personal success probability that exceeds the objective probability of the outcome. This type of overconfidence is likely when an event that is at least partially determined by chance is characterized by factors that normally lead to enhanced outcomes under skill-based situations, such as choice, stimulus or response familiarity, competition, and passive or active involvement (Langer, 1975). These skill-related cues thus give rise to individuals’ perceived control over an outcome, which in turn leads to an unrealistic subjective probability of success. While this effect was originally demonstrated with predominantly chance-driven events, the illusion of control can be even more pronounced in situations that have elements of both skill and chance, since individuals are even more apt to attribute success in the outcome due to skill factors.
Seminal articles: On Illusion Of Control
Langer, E. J. “The Illusion of Control,” Journal of Personality and Social Psychology (32:2), 1975, pp. 311-328.
Langer, E. J. and Roth, J. “Heads I Win, Tails It’s Chance: The Illusion of Control as a Function of the Sequence of Outcomes in a Purely Chance Task,” Journal of Personality and Social Psychology (32:6), 1975, pp. 951-955.
Presson, P. K. and Benassi, V. A. “Illusion of Control: A Meta-Analytic Review,” Journal of Social Behavior and Personality (11:3): 1996, pp. 493-510.