Motivated belief updating and rationalization of information
Christoph Drobner and
Sebastian Goerg ()
VfS Annual Conference 2021 (Virtual Conference): Climate Economics from Verein für Socialpolitik / German Economic Association
We study belief updating about relative performance in an ego-relevant task. Manipulating beliefs about the ego-relevance of the task, we show that subjects update their beliefs about relative performance more optimistically as direct belief utility increases. This finding provides clean evidence for the optimistic belief updating hypothesis and supports theoretical models with direct belief utility. Moreover, we document that subjects ex-post rationalize information by discounting their beliefs about the ego-relevance of the task as the number of bad signals increases. Taken together, these findings suggest that subjects use two alternative strategies to protect their ego despite the presence of objective information.
Keywords: Motivated beliefs; Optimistic belief updating; 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)
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-upt
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Working Paper: Motivated Belief Updating and Rationalization of Information (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc21:243173
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