Identity, Information, and Situations

Daniele Pennesi

Journal of the European Economic Association, 2024, vol. 22, issue 2, 751-780

Abstract: This paper introduces a model of individual behavior based on identity, a person’s sense of self. The individual evaluates situations, that is, sets of available actions given a belief about the actions’ uncertain payoffs. In some situations, a psychological cost arises because the individual’s identity prescribes an action that differs from the one maximizing material benefits. The model shows that a common process of weighing psychological costs and material benefits drives the choice of both information and future opportunities. As a result, information avoidance is akin to preferring fewer opportunities, such as crossing the street to avoid a fundraiser. The model provides a coherent rationalization for diverse behaviors, including willful ignorance, opting out of social dilemmas, and excess entry into competitive environments. The psychological cost varies non-monotonically with the quality of information or with having more opportunities. Non-monotonicity complicates the identification of prescriptions from behavior, a difficulty that is partially resolvable by observing specific choices.

Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:oup:jeurec:v:22:y:2024:i:2:p:751-780.

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