Confidence is an essential ingredient of success in a wide range of domains ranging
from job performance and mental health to sports, business and combat. Some authors
have suggested that not just confidence but overconfidence--believing you are better
than you are in reality--is advantageous because it serves to increase ambition, morale,
resolve, persistence or the credibility of bluffing, generating a self-fulfilling
prophecy in which exaggerated confidence actually increases the probability of success.
However, overconfidence also leads to faulty assessments, unrealistic expectations
and hazardous decisions, so it remains a puzzle how such a false belief could evolve
or remain stable in a population of competing strategies that include accurate, unbiased
beliefs. Here we present an evolutionary model showing that, counterintuitively, overconfidence
maximizes individual fitness and populations tend to become overconfident, as long
as benefits from contested resources are sufficiently large compared with the cost
of competition. In contrast, unbiased strategies are only stable under limited conditions.
The fact that overconfident populations are evolutionarily stable in a wide range
of environments may help to explain why overconfidence remains prevalent today, even
if it contributes to hubris, market bubbles, financial collapses, policy failures,
disasters and costly wars.