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Confirmation bias with motivated beliefs

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  • Charness, Gary
  • Dave, Chetan

Abstract

We investigate whether the confirmation bias is mitigated in signal-extraction environments by outside financial interests. We include a background strategic consideration leading to ‘motivated beliefs’ for people in one role, as they receive higher equilibrium payoffs in a background game in one of two states, while people in the other role receive the same equilibrium payoffs in both. We find systematic differences in beliefs and our results suggest that players with motivated beliefs deviate less from Bayesian updating. However, such players still exhibit a confirmation bias in that they place additional weight on confirming information, in contrast to Bayesians.

Suggested Citation

  • Charness, Gary & Dave, Chetan, 2017. "Confirmation bias with motivated beliefs," Games and Economic Behavior, Elsevier, vol. 104(C), pages 1-23.
    • Handle: RePEc:eee:gamebe:v:104:y:2017:i:c:p:1-23
    DOI: 10.1016/j.geb.2017.02.015
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    References listed on IDEAS

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    More about this item

    Keywords

    Confirmation bias; Motivated beliefs; Bayesian updating; Experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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