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I’ll See It When I Believe It: A Simple Model of Cognitive Consistency

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  • Leeat Yariv

    (University of California at Los Angeles)

Abstract

Many observations from psychology, political science, and organizational behavior indicate that people exhibit a taste for consistency. Individuals are inclined to interpret new evidence in ways that confirm their pre-existing beliefs. They also tend to change their beliefs to enhance the desirability of their past actions. The current paper explores the implications of a simple model incorporating these effects into an agent’s utility function. The model allows a characterization of when: 1. agents become under- and over-confident, 2. agents prefer less accurate signals, i.e., they are willing to pay in order to forgo information, and 3. agents exhibit excess stickiness or excess volatility in action choices.

Suggested Citation

  • Leeat Yariv, 2005. "I’ll See It When I Believe It: A Simple Model of Cognitive Consistency," Working Papers 2005-3, Princeton University. Economics Department..
    • Handle: RePEc:pri:econom:2005-3
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    File URL: http://lyariv.mycpanel.princeton.edu//papers/Believe.pdf
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    References listed on IDEAS

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    7. Leeat Yariv, 2002. "I'll See It When I Believe It - A Simple Model of Cognitive Consistency," Cowles Foundation Discussion Papers 1352, Cowles Foundation for Research in Economics, Yale University.
    8. Constantinides, George M, 1990. "Habit Formation: A Resolution of the Equity Premium Puzzle," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 519-543, June.
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    11. Leeat Yariv, 2001. "Believe and Let Believe: Axiomatic Foundations for Belief Dependent Utility Functionals," Cowles Foundation Discussion Papers 1344, Cowles Foundation for Research in Economics, Yale University.
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    Cited by:

    1. Park, Hyoeun & Tayawa, Jason Paulo, 2024. "Anchored belief updating from recommendations," Journal of Mathematical Economics, Elsevier, vol. 110(C).

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    More about this item

    Keywords

    Belief utility; cognitive dissonance; confirmatory bias; overconfidence; selective exposure;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • 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
    • M30 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - General

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