Does self-relevance affect information processing? Experimental evidence on the response to performance and non-performance feedback

In many settings, individuals are confronted with decision problems that involve information relevant to their self-image. This paper uses an experiment to explore whether the self-relevance of information influences information processing. The experiment implements two information processing tasks that are identical from a theoretical perspective, but differ in the type of information provided: performance feedback versus information within the context of a purely statistical updating problem. The results suggest that information processing differs significantly across self-relevant and self-irrelevant contexts. In the self-relevant context, except in cases where initial self-confidence is high, subjects overweigh unfavorable performance feedback, leading to overly pessimistic beliefs. This is in contrast to the corresponding self-irrelevant setup, where departures from Bayes’ rule do not follow a consistent pattern in terms of direction, and are smaller in magnitude. In addition, I find that women may interpret positive feedback more conservatively than men, leading to more pessimistic posteriors.