Motivated Beliefs, Independence and Cooperation

Humans are social animals but sometimes stay alone. The paper theoretically investigates the connection between an intraperson game and an interperson interaction. Motivated beliefs supplied from memory management due to present bias in the individual investment problem give rise to a positive spillover on others through social interactions, suggesting that a high frequency of social interactions reduces an individual’s tendency to cooperate with others, exacerbating the free-riding problem. We also establish a positive relationship between overconfidence and prosocial behaviors. Evidence from cross-country observational data and cross-sectional data collected from an online experiment is largely consistent with our theoretical implications.