Motivated Belief Updating and Rationalization of Information

Christoph Drobner () and Sebastian Goerg
Additional contact information
Christoph Drobner: Technical University of Munich

No 15682, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We study belief updating about relative performance in an ego-relevant task. Manipulating the perceived ego-relevance of the task, we show that subjects update their beliefs optimistically because they derive direct utility flows from holding positive beliefs. This finding provides a behavioral explanation why and how overconfidence can evolve in the presence of objective information. Moreover, we document that subjects, who received more bad signals, downplay the ego-relevance of the task. Taken together, these findings suggest that subjects use two alternative strategies to protect their ego when presented with objective information.

Keywords: motivated beliefs; optimistic belief updating; overconfidence; direct belief utility; Bayes' rule; ex-post rationalization (search for similar items in EconPapers)
JEL-codes: C91 D83 D84 (search for similar items in EconPapers)
Pages: 66 pages
Date: 2022-10
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-mic and nep-upt
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Motivated Belief Updating and Rationalization of Information (2024)
Working Paper: Motivated Belief Updating and Rationalization of Information (2021)
Working Paper: Motivated belief updating and rationalization of information (2021)
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