IDEAS home Printed from https://ideas.repec.org/a/eee/eecrev/v142y2022ics0014292121002786.html
   My bibliography  Save this article

Protecting the ego: Motivated information selection and updating

Author

Listed:
  • Castagnetti, Alessandro
  • Schmacker, Renke

Abstract

We investigate whether individuals self-select feedback that allows them to maintain their motivated beliefs. In our lab experiment, subjects can choose the information structure that gives them feedback regarding their rank in the IQ distribution (ego-relevant treatment) or regarding a random number (control). Although beliefs are incentivized, individuals are less likely to select the most informative feedback in the ego-relevant treatment. Instead, many individuals select information structures in which negative feedback is less salient. When receiving negative feedback with lower salience subjects update their beliefs less, but only in the ego-relevant treatment and not in the control. Hence, our results suggest that individuals sort themselves into information structures that allow them to misinterpret negative feedback in a self-serving way. Consequently, subjects in the IQ treatment remain on average overconfident despite receiving feedback.

Suggested Citation

  • Castagnetti, Alessandro & Schmacker, Renke, 2022. "Protecting the ego: Motivated information selection and updating," European Economic Review, Elsevier, vol. 142(C).
    • Handle: RePEc:eee:eecrev:v:142:y:2022:i:c:s0014292121002786
    DOI: 10.1016/j.euroecorev.2021.104007
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0014292121002786
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.euroecorev.2021.104007?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ulrike Malmendier & Geoffrey Tate, 2005. "CEO Overconfidence and Corporate Investment," Journal of Finance, American Finance Association, vol. 60(6), pages 2661-2700, December.
    2. Christoph Drobner, 2022. "Motivated Beliefs and Anticipation of Uncertainty Resolution," American Economic Review: Insights, American Economic Association, vol. 4(1), pages 89-105, March.
    3. Larry G. Epstein & Yoram Halevy, 2019. "Hard-to-Interpret Signals," Working Papers tecipa-634, University of Toronto, Department of Economics.
    4. Edi Karni, 2009. "A Mechanism for Eliciting Probabilities," Econometrica, Econometric Society, vol. 77(2), pages 603-606, March.
    5. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2011. "Individual Risk Attitudes: Measurement, Determinants, And Behavioral Consequences," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 522-550, June.
    6. Roland G FryerJr & Philipp Harms & Matthew O Jackson, 2019. "Updating Beliefs when Evidence is Open to Interpretation: Implications for Bias and Polarization," Journal of the European Economic Association, European Economic Association, vol. 17(5), pages 1470-1501.
    7. Grossman, Zachary & Owens, David, 2012. "An unlucky feeling: Overconfidence and noisy feedback," Journal of Economic Behavior & Organization, Elsevier, vol. 84(2), pages 510-524.
    8. Schwardmann, Peter & van der Weele, Joel, 2019. "Deception and self-deception," Munich Reprints in Economics 78222, University of Munich, Department of Economics.
    9. Gary Charness & Ryan Oprea & Sevgi Yuksel, 2021. "How do People Choose Between Biased Information Sources? Evidence from a Laboratory Experiment," Journal of the European Economic Association, European Economic Association, vol. 19(3), pages 1656-1691.
    10. David M. Grether, 1980. "Bayes Rule as a Descriptive Model: The Representativeness Heuristic," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 95(3), pages 537-557.
    11. Garz, Marcel & Sood, Gaurav & Stone, Daniel F. & Wallace, Justin, 2020. "The supply of media slant across outlets and demand for slant within outlets: Evidence from US presidential campaign news," European Journal of Political Economy, Elsevier, vol. 63(C).
    12. Thomas Buser & Leonie Gerhards & Joël Weele, 2018. "Responsiveness to feedback as a personal trait," Journal of Risk and Uncertainty, Springer, vol. 56(2), pages 165-192, April.
    13. Grossman, Zachary & Owens, David, 2012. "An unlucky feeling: Overconfidence and noisy feedback," Journal of Economic Behavior & Organization, Elsevier, vol. 84(2), pages 510-524.
    14. Charness, Gary & Dave, Chetan, 2017. "Confirmation bias with motivated beliefs," Games and Economic Behavior, Elsevier, vol. 104(C), pages 1-23.
    15. Armin Falk & Florian Zimmermann, 2016. "Beliefs and Utility: Experimental Evidence on Preferences for Information," CESifo Working Paper Series 6061, CESifo.
    16. Roland Bénabou & Jean Tirole, 2005. "Self-Confidence and Personal Motivation," International Economic Association Series, in: Bina Agarwal & Alessandro Vercelli (ed.), Psychology, Rationality and Economic Behaviour, chapter 2, pages 19-57, Palgrave Macmillan.
    17. Felix Chopra & Ingar K. Haaland & Christopher Roth, 2019. "Do People Value More Informative News?," CESifo Working Paper Series 8026, CESifo.
    18. John P. A. Ioannidis & T. D. Stanley & Hristos Doucouliagos, 2017. "The Power of Bias in Economics Research," Economic Journal, Royal Economic Society, vol. 127(605), pages 236-265, October.
    19. Benjamin Enke, 2020. "What You See Is All There Is," The Quarterly Journal of Economics, Oxford University Press, vol. 135(3), pages 1363-1398.
    20. Guido W. Imbens, 2015. "Matching Methods in Practice: Three Examples," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 373-419.
    21. Ginger Zhe Jin & Michael Luca & Daniel Martin, 2021. "Is No News (Perceived As) Bad News? An Experimental Investigation of Information Disclosure," American Economic Journal: Microeconomics, American Economic Association, vol. 13(2), pages 141-173, May.
    22. Kai Barron, 2021. "Belief updating: does the ‘good-news, bad-news’ asymmetry extend to purely financial domains?," Experimental Economics, Springer;Economic Science Association, vol. 24(1), pages 31-58, March.
    23. Silvia Saccardo & Marta Serra-Garcia, 2020. "Cognitive Flexibility or Moral Commitment? Evidence of Anticipated Belief Distortion," CESifo Working Paper Series 8529, CESifo.
    24. Uri Gneezy & Jan Potters, 1997. "An Experiment on Risk Taking and Evaluation Periods," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 631-645.
    25. Roland Bénabou & Jean Tirole, 2016. "Mindful Economics: The Production, Consumption, and Value of Beliefs," Journal of Economic Perspectives, American Economic Association, vol. 30(3), pages 141-164, Summer.
    26. Salvatore Nunnari & Giovanni Montari, 2019. "Audi Alteram Partem: An Experiment on Selective Exposure to Information," Working Papers 650, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    27. Matthew Gentzkow & Jesse M. Shapiro, 2010. "What Drives Media Slant? Evidence From U.S. Daily Newspapers," Econometrica, Econometric Society, vol. 78(1), pages 35-71, January.
    28. Benjamin Enke & Frederik Schwerter & Florian Zimmermann, 2019. "Associative Memory and Belief Formation," CESifo Working Paper Series 7916, CESifo.
    29. John A. List & Azeem M. Shaikh & Yang Xu, 2019. "Multiple hypothesis testing in experimental economics," Experimental Economics, Springer;Economic Science Association, vol. 22(4), pages 773-793, December.
    30. Jean-Pierre Benoît & Juan Dubra & Don A. Moore, 2015. "Does The Better-Than-Average Effect Show That People Are Overconfident?: Two Experiments," Journal of the European Economic Association, European Economic Association, vol. 13(2), pages 293-329, April.
    31. Yaron Azrieli & Christopher P. Chambers & Paul J. Healy, 2018. "Incentives in Experiments: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 126(4), pages 1472-1503.
    32. Nielsen, Kirby, 2020. "Preferences for the resolution of uncertainty and the timing of information," Journal of Economic Theory, Elsevier, vol. 189(C).
    33. Richard Sabot & John Wakeman-Linn, 1991. "Grade Inflation and Course Choice," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 159-170, Winter.
    34. Christoph Drobner & Sebastian J. Goerg, 2021. "Motivated Belief Updating and Rationalization of Information," Munich Papers in Political Economy 18, Munich School of Politics and Public Policy and the School of Management at the Technical University of Munich.
    35. Dan Lovallo & Colin Camerer, 1999. "Overconfidence and Excess Entry: An Experimental Approach," American Economic Review, American Economic Association, vol. 89(1), pages 306-318, March.
    36. Chen, Daniel L. & Schonger, Martin & Wickens, Chris, 2016. "oTree—An open-source platform for laboratory, online, and field experiments," Journal of Behavioral and Experimental Finance, Elsevier, vol. 9(C), pages 88-97.
    37. Mitchell Hoffman, 2016. "How is Information Valued? Evidence from Framed Field Experiments," Economic Journal, Royal Economic Society, vol. 126(595), pages 1884-1911, September.
    38. Mariana Blanco & Dirk Engelmann & Alexander Koch & Hans-Theo Normann, 2010. "Belief elicitation in experiments: is there a hedging problem?," Experimental Economics, Springer;Economic Science Association, vol. 13(4), pages 412-438, December.
    39. Thomas Ahn & Peter Arcidiacono & Amy Hopson & James R. Thomas, 2019. "Equilibrium Grade Inflation with Implications for Female Interest in STEM Majors," NBER Working Papers 26556, National Bureau of Economic Research, Inc.
    40. Soo Hong Chew & Wei Huang & Xiaojian Zhao, 2020. "Motivated False Memory," Journal of Political Economy, University of Chicago Press, vol. 128(10), pages 3913-3939.
    41. Camelia M. Kuhnen, 2015. "Asymmetric Learning from Financial Information," Journal of Finance, American Finance Association, vol. 70(5), pages 2029-2062, October.
    42. Florian Zimmermann, 2020. "The Dynamics of Motivated Beliefs," American Economic Review, American Economic Association, vol. 110(2), pages 337-361, February.
    43. Alexander Coutts, 2019. "Good news and bad news are still news: experimental evidence on belief updating," Experimental Economics, Springer;Economic Science Association, vol. 22(2), pages 369-395, June.
    44. Emily Oster & Ira Shoulson & E. Ray Dorsey, 2013. "Limited Life Expectancy, Human Capital and Health Investments," American Economic Review, American Economic Association, vol. 103(5), pages 1977-2002, August.
    45. Emily H. Ho & David Hagmann & George Loewenstein, 2021. "Measuring Information Preferences," Management Science, INFORMS, vol. 67(1), pages 126-145, January.
    46. Gotthard-Real, Alexander, 2017. "Desirability and information processing: An experimental study," Economics Letters, Elsevier, vol. 152(C), pages 96-99.
    47. David Eil & Justin M. Rao, 2011. "The Good News-Bad News Effect: Asymmetric Processing of Objective Information about Yourself," American Economic Journal: Microeconomics, American Economic Association, vol. 3(2), pages 114-138, May.
    48. Ertac, Seda, 2011. "Does self-relevance affect information processing? Experimental evidence on the response to performance and non-performance feedback," Journal of Economic Behavior & Organization, Elsevier, vol. 80(3), pages 532-545.
    49. Peter Schwardmann & Joël van der Weele, 2019. "Deception and self-deception," Nature Human Behaviour, Nature, vol. 3(10), pages 1055-1061, October.
    50. Niklas Karlsson & George Loewenstein & Duane Seppi, 2009. "The ostrich effect: Selective attention to information," Journal of Risk and Uncertainty, Springer, vol. 38(2), pages 95-115, April.
    51. Russell Golman & David Hagmann & George Loewenstein, 2017. "Information Avoidance," Journal of Economic Literature, American Economic Association, vol. 55(1), pages 96-135, March.
    52. Alberto Abadie & Guido W. Imbens, 2006. "Large Sample Properties of Matching Estimators for Average Treatment Effects," Econometrica, Econometric Society, vol. 74(1), pages 235-267, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. Jantsje M. Mol & Ivan Soraperra & Joël J. van der Weele, 2023. "Spoiling the party. Experimental evidence on the willingness to transmit inconvenient ethical information," Tinbergen Institute Discussion Papers 23-062/I, Tinbergen Institute.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Markus M. Möbius & Muriel Niederle & Paul Niehaus & Tanya S. Rosenblat, 2022. "Managing Self-Confidence: Theory and Experimental Evidence," Management Science, INFORMS, vol. 68(11), pages 7793-7817, November.
    2. Kai Barron, 2021. "Belief updating: does the ‘good-news, bad-news’ asymmetry extend to purely financial domains?," Experimental Economics, Springer;Economic Science Association, vol. 24(1), pages 31-58, March.
    3. Banerjee, Ritwik & Gupta, Nabanita Datta & Villeval, Marie Claire, 2020. "Feedback spillovers across tasks, self-confidence and competitiveness," Games and Economic Behavior, Elsevier, vol. 123(C), pages 127-170.
    4. Daniel J. Benjamin, 2018. "Errors in Probabilistic Reasoning and Judgment Biases," NBER Working Papers 25200, National Bureau of Economic Research, Inc.
    5. Cavalan, Quentin & de Gardelle, Vincent & Vergnaud, Jean-Christophe, 2023. "No evidence of biased updating in beliefs about absolute performance: A replication and generalization of Grossman and Owens (2012)," Journal of Economic Behavior & Organization, Elsevier, vol. 211(C), pages 530-548.
    6. Andrea Amelio & Florian Zimmermann, 2023. "Motivated Memory in Economics—A Review," Games, MDPI, vol. 14(1), pages 1-15, January.
    7. Alexander Coutts, 2019. "Good news and bad news are still news: experimental evidence on belief updating," Experimental Economics, Springer;Economic Science Association, vol. 22(2), pages 369-395, June.
    8. Joshua E. Blumenstock & Matthew Olckers, 2020. "Gamblers Learn from Experience," Papers 2011.00432, arXiv.org, revised Aug 2021.
    9. Barron, Kai & Huck, Steffen & Jehiel, Philippe, 2019. "Everyday econometricians: Selection neglect and overoptimism when learning from others," Discussion Papers, Research Unit: Economics of Change SP II 2019-301, WZB Berlin Social Science Center.
    10. Nisvan Erkal & Lata Gangadharan & Boon Han Koh, 2022. "By chance or by choice? Biased attribution of others’ outcomes when social preferences matter," Experimental Economics, Springer;Economic Science Association, vol. 25(2), pages 413-443, April.
    11. Kai Barron & Christina Gravert, 2022. "Confidence and Career Choices: An Experiment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 124(1), pages 35-68, January.
    12. Coutts, Alexander, 2019. "Testing models of belief bias: An experiment," Games and Economic Behavior, Elsevier, vol. 113(C), pages 549-565.
    13. Murad, Zahra & Starmer, Chris, 2021. "Confidence snowballing and relative performance feedback," Journal of Economic Behavior & Organization, Elsevier, vol. 190(C), pages 550-572.
    14. 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).
    15. Heger, Stephanie A. & Papageorge, Nicholas W., 2018. "We should totally open a restaurant: How optimism and overconfidence affect beliefs," Journal of Economic Psychology, Elsevier, vol. 67(C), pages 177-190.
    16. Christoph Drobner, 2020. "Motivated Beliefs and Anticipation of Uncertainty Resolution," Munich Papers in Political Economy 07, Munich School of Politics and Public Policy and the School of Management at the Technical University of Munich.
    17. Nisvan Erkal & Lata Gangadharan & Boon Han Koh, 2018. "By chance or by choice? Biased attribution of others’ outcomes," Department of Economics - Working Papers Series 2040, The University of Melbourne.
    18. Alexander Coutts, 2017. "Good news and bad news are still news: Experimental evidence on belief updating," FEUNL Working Paper Series novaf:wp1703, Universidade Nova de Lisboa, Faculdade de Economia.
    19. Thaler, Michael, 2021. "Gender differences in motivated reasoning," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 501-518.
    20. Thomas Buser & Leonie Gerhards & Joël Weele, 2018. "Responsiveness to feedback as a personal trait," Journal of Risk and Uncertainty, Springer, vol. 56(2), pages 165-192, April.

    More about this item

    Keywords

    Motivated beliefs; Updating; Information acquisition; Overconfidence;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:142:y:2022:i:c:s0014292121002786. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eer .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.