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Motivated Belief Updating and Rationalization of Information

Author

Listed:
  • Christoph Drobner

    (TUMCS for Biotechnology and Sustainability, Technical University of Munich, 94315 Straubing, Germany; Faculty of Economics, UniDistance Suisse, 3900 Brig, Switzerland)

  • Sebastian J. Goerg

    (TUMCS for Biotechnology and Sustainability, Technical University of Munich, 94315 Straubing, Germany; TUM School of Management, Technical University of Munich, 80333 Munich, Germany)

Abstract

We study belief updating about relative performance in an ego-relevant task. Manipulating the perceived ego relevance of the task, we show that subjects substantially overweight positive information relative to negative information because they derive direct utility from holding positive beliefs. This finding provides a behavioral explanation why and how overconfidence can evolve in the presence of objective information. Moreover, we document that subjects who receive more negative information downplay the ego relevance of the task. These findings suggest that subjects use two alternative strategies to protect their ego when presented with objective information.

Suggested Citation

  • Christoph Drobner & Sebastian J. Goerg, 2024. "Motivated Belief Updating and Rationalization of Information," Management Science, INFORMS, vol. 70(7), pages 4583-4592, July.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:7:p:4583-4592
    DOI: 10.1287/mnsc.2023.02537
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    Cited by:

    1. Charlotte Cordes & Jana Friedrichsen & Simeon Schudy, 2023. "Motivated Procrastination," Rationality and Competition Discussion Paper Series 471, CRC TRR 190 Rationality and Competition.
    2. Jeanne Hagenbach & Charlotte Saucet, 2024. "Motivated Skepticism," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-04821601, HAL.
    3. 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).
    4. 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.
    5. Jeanne Hagenbach & Charlotte Saucet, 2024. "Motivated Skepticism," SciencePo Working papers Main hal-03770685, HAL.
    6. Jeanne Hagenbach & Charlotte Saucet, 2024. "Motivated Skepticism," Working Papers hal-03770685, HAL.
    7. 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.
    8. Jeanne Hagenbach & Charlotte Saucet, 2024. "Motivated Skepticism," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-03770685, HAL.
    9. Castagnetti, Alessandro & Schmacker, Renke, 2022. "Protecting the ego: Motivated information selection and updating," European Economic Review, Elsevier, vol. 142(C).
    10. Jeanne Hagenbach & Charlotte Saucet, 2024. "Motivated Skepticism," Post-Print hal-04821601, HAL.
    11. Bolte, Lukas & Fan, Tony Q., 2024. "Motivated mislearning: The case of correlation neglect," Journal of Economic Behavior & Organization, Elsevier, vol. 217(C), pages 647-663.

    More about this item

    Keywords

    motivated beliefs; optimistic belief updating; overconfidence; direct belief utility; Bayes’ rule;
    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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