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Motivated belief updating and rationalization of information

Author

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  • Drobner, Christoph
  • Goerg, Sebastian J.

Abstract

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.

Suggested Citation

  • Drobner, Christoph & Goerg, Sebastian J., 2021. "Motivated belief updating and rationalization of information," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 243173, Verein für Socialpolitik / German Economic Association, revised 2021.
    • Handle: RePEc:zbw:vfsc21:243173
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    Cited by:

    1. Cavalan, Quentin & de Gardelle, Vincent & Vergnaud, Jean-Christophe, 2022. "I did most of the work! Three sources of bias in bargaining with joint production," Journal of Economic Psychology, Elsevier, vol. 93(C).
    2. Samir Huseynov, 2023. "ChatGPT and the Labor Market: Unraveling the Effect of AI Discussions on Students' Earnings Expectations," Papers 2305.11900, arXiv.org, revised Aug 2023.
    3. Jeanne Hagenbach & Charlotte Saucet, 2024. "Motivated Skepticism," SciencePo Working papers Main hal-03770685, HAL.
    4. Jeanne Hagenbach & Charlotte Saucet, 2024. "Motivated Skepticism," Working Papers hal-03770685, HAL.
    5. Alexander Coutts & Boon Han Koh & Zahra Murad, 2024. "The signals we give: Performance feedback, gender, and competition," Working Papers in Economics & Finance 2024-02, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.
    6. Jeanne Hagenbach & Charlotte Saucet, 2024. "Motivated Skepticism," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-03770685, HAL.
    7. Charlotte Cordes & Jana Friedrichsen & Simeon Schudy, 2023. "Motivated Procrastination," Rationality and Competition Discussion Paper Series 471, CRC TRR 190 Rationality and Competition.
    8. Castagnetti, Alessandro & Schmacker, Renke, 2022. "Protecting the ego: Motivated information selection and updating," European Economic Review, Elsevier, vol. 142(C).

    More about this item

    Keywords

    Motivated beliefs; Optimistic belief updating; Direct belief utility; Bayes' rule; Ex-post rationalization;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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