In the study, 72 students were asked to rate their own ability and the ability of their peers after the first day of their course.
Of those, 32 students (about 45 per cent) were under confident in their ability as compared to their final mark, 29 students (40 per cent) were overconfident and 11 (15 per cent) were accurate in their assessments of their own ability.
There was a positive correlation between the grades students predicted for themselves and the grades others predicted for them.
In other words, students who predicted higher grades for themselves were predicted to have higher grades by others, irrespective of their actual final score.
The same applied to those who were under confident.
The task was repeated after six weeks of the course when the students knew each other better and the findings remained the same. Those who were overconfident were still over-rated by others.
Study author Dr Vivek Nityananda, research associate at Newcastle University's Institute of Neuroscience, said: 'These findings suggest that people don't always reward the most accomplished individual but rather the most self-deceived.
'We think this supports an evolutionary theory of self-deception.
'It can be beneficial to have others believe you are better than you are and the best way to do this is to deceive yourself - which might be what we have evolved to do.
'This can cause problems as overconfident people may also be more likely to take risks.
'So if too many people overrate themselves and deceive others about their abilities within organisations, then this could lead to disastrous consequences such as airplane crashes or financial collapses.'
Joint lead author Dr Shakti Lamba, of the University of Exeter, added: 'If overconfident people are more likely to be risk prone then by promoting them we may be creating institutions, such as banks and armies, that are more vulnerable to risk.'
- Daily Mail