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A Dynamic Model of Decision-making Under Cognitive Dissonance and Modularity of Mind

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  • Karagözoğlu Emin

    (METEOR)

Abstract

This paper attempts to explain how and why seemingly contradictory beliefs co-exist in an optimizing individual''s mind in the long run. We set up a dynamic model of decision-making inwhich the individual.s mind is composed of a coordinating principal and two conflicting agents. We take into account the cognitive dissonance experienced due to the conflict between the agents. Each agent (or self ) is specialized in perceiving a particular type of signal, which describes the world. Cognitive dissonance levels in our model are not constant. Instead, the individual''s split-selves are open to habituation, which can lead to a reduction in cognitive dissonance. We prove the existence of an optimal strategy with a threshold structure. Our results show that the co-existence of conflicting beliefs might be an equilibrium phenomenon even in an optimizing mind. Suggestions that may avoid the tension that occurs due to cognitive dissonance are made.

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Bibliographic Info

Paper provided by Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization in its series Research Memoranda with number 014.

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Date of creation: 2010
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Handle: RePEc:dgr:umamet:2010014

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Web page: http://www.maastrichtuniversity.nl/web/UMPublications.htm

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Keywords: microeconomics ;

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  1. Brady, Gordon L & Clark, J R & Davis, William L, 1995. " The Political Economy of Dissonance," Public Choice, Springer, vol. 82(1-2), pages 37-51, January.
  2. Larry Epstein & Igor Kopylov, 2006. "Cognitive Dissonance and Choice," RCER Working Papers 525, University of Rochester - Center for Economic Research (RCER).
  3. Isabelle Brocas & Juan D. Carrillo, 2008. "The Brain as a Hierarchical Organization," American Economic Review, American Economic Association, vol. 98(4), pages 1312-46, September.
  4. Akerlof, George A & Dickens, William T, 1982. "The Economic Consequences of Cognitive Dissonance," American Economic Review, American Economic Association, vol. 72(3), pages 307-19, June.
  5. Thaler, Richard H & Shefrin, H M, 1981. "An Economic Theory of Self-Control," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 392-406, April.
  6. Faruk Gul & Wolfgang Pesendorfer, 2001. "Temptation and Self-Control," Econometrica, Econometric Society, vol. 69(6), pages 1403-1435, November.
  7. Rabin, Matthew, 1994. "Cognitive dissonance and social change," Journal of Economic Behavior & Organization, Elsevier, vol. 23(2), pages 177-194, March.
  8. Oxoby, Robert J., 2003. "Attitudes and allocations: status, cognitive dissonance, and the manipulation of attitudes," Journal of Economic Behavior & Organization, Elsevier, vol. 52(3), pages 365-385, November.
  9. repec:aea:jeclit:v:43:y:2005:i:1:p:9-64 is not listed on IDEAS
  10. Dickens, William T., 1986. "Crime and punishment again: The economic approach with a psychological twist," Journal of Public Economics, Elsevier, vol. 30(1), pages 97-107, June.
  11. Gilad, Benjamin & Kaish, Stanley & Loeb, Peter D., 1987. "Cognitive dissonance and utility maximization : A general framework," Journal of Economic Behavior & Organization, Elsevier, vol. 8(1), pages 61-73, March.
  12. Olof Johansson-Stenman & Henrik Svedsäter, 2008. "Measuring Hypothetical Bias in Choice Experiments: The Importance of Cognitive Consistency," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 41.
  13. James Konow, 2000. "Fair Shares: Accountability and Cognitive Dissonance in Allocation Decisions," American Economic Review, American Economic Association, vol. 90(4), pages 1072-1091, September.
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