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Protecting the Ego: Motivated Information Selection and Updating

Aufsätze referiert extern - Web of Science

Alessandro Castagnetti, Renke Schmacker

In: European Economic Review 142 (2022), 104007, 20 S.

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.



JEL-Classification: D83;D91;C91
Keywords: Motivated beliefs, Updating, Information acquisition, Overconfidence
DOI:
https://doi.org/10.1016/j.euroecorev.2021.104007

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